Disney also reported quarterly revenue below expectations and lost about 12 million subscribers
Walt Disney CEO Bob Iger acknowledged yesterday that the entertainment company faces a “challenging environment” in the short term, but stressed progress on cutting costs and a focus on creativity, even as quarterly results showed where the pain points were. from Disney.
Disney shares rose nearly 3% in after-hours trading as Iger touted a $1 billion operating income improvement in the company’s streaming business over the past three quarters, which points to profitability in 2024.
But he also recognized the need to improve the quality of Disney movies, position the company’s flagship sports brand, ESPN, to broadcast directly to consumers, and resolve the writer-actor strikes in Hollywood that have halted much of the film and television production.
“I returned to Disney in November and agreed to stay longer, because there was more to accomplish before our transformation was complete,” Iger said, describing a “challenging environment in the short term.”
The company beat Wall Street earnings expectations for its fiscal third quarter and said it was on track to cut costs by more than the $5.5 billion it promised investors in February.
Disney also posted quarterly revenue below expectations and came in slightly below analyst projections for US Disney+ subscribers.
The media conglomerate said it will raise the price of the ad-free tier of the Disney+ service by 27% to $13.99 and increase the ad-free version of Hulu by 20%.
Seeking ways to attract and retain subscribers in a competitive streaming market, Disney also announced it would launch ad-supported streaming in Europe and Canada and provide US subscribers with a new ad-free package in the coming months. Ger said he would address password sharing next year, echoing Netflix. He said Disney will reduce the number of titles it releases and also the cost per title.
Income falls short
Disney said it cut losses on its streaming services to $512 million in its fiscal third quarter from about $1.1 billion a year ago.
Added 800,000 Disney+ subscribers, 100,000 subscribers below analyst estimates, and removed 12.5 million subscribers to the Disney Hotstar service in India, or nearly a quarter of its subscribers, as it relinquished rights to the matches. Indian Premiere League cricket.
“Disney will have to reduce prices from current levels in an effort to stimulate demand and defend its market share in an increasingly competitive industry,” said Jesse Cohen, a senior analyst at Investing.com.
Disney’s revenue for the quarter ended July 1 rose 4% to $22.33 billion from a year earlier, just below Wall Street estimates, according to Refinitiv. It delivered earnings per share of $1.03, excluding certain items, beating Wall Street projections of 95 cents a share.
The company took $2.65 billion in impairment and restructuring charges in the quarter, reflecting the cost of removing some of its streaming content, terminating licensing agreements and $210 million in severance payments to laid-off workers.
Disney’s traditional television business continued its decline. Higher production costs for sports programming and lower affiliate income dragged down the performance of its cable channels. Television revenue fell 7% to $6.7 billion, while operating income fell 23% to $1.9 billion.
Disney’s direct-to-consumer business reported a 9% increase in revenue to $5.5 billion, as average revenue per subscriber rose on Disney+ and Hulu.
Content and licensing sales, the unit that includes movie and television sales, reported a higher operating loss of $243 million in the quarter, compared with a loss of $27 million a year ago, as some films disappointed, including the new live action version of The Little Mermaid.
Disney’s Parks, Experiences and Products group reported a 13% increase in revenue for the quarter to $8.3 billion and an 11% increase in operating income to $2.4 billion. Results were boosted by the recovery of the Shanghai Disney Resort, which was open throughout the quarter compared to the same period a year earlier, when Covid-19 forced the park to close on all but three days. The unit had lower operating income at its national parks, due to reductions at Walt Disney World Resort in Orlando, Florida.