Disney
reported mixed financial results late Wednesday, but the stock rallied after the entertainment giant announced higher prices for its streaming services and foreshadowed a crackdown on password sharing.
For the quarter ending July 1, Disney’s revenue fell slightly shy of Wall Street estimates, but adjusted profits topped expectations.
Revenue in the company’s Media and Entertainment segment fell short of estimates, but that was offset by better-than-expected results in the Parks, Experiences and Media business.
Disney+ subscribers ended the quarter at 105.7 million, up 1% from a year ago, and modestly above the 104.9 million reported one quarter earlier. Total subscribers were 154 million, up from 153.1 million a year ago, but slightly below the Wall Street consensus of 155 million. Hulu subscribers ended at 48.3 million, up less than 1% from a year ago.
CEO Bob Iger said on a conference call with investors that 3.3 million people have signed up for the ad-supported option for Disney+.
Iger added that the company is exploring ways to address account sharing, a step that
Netflix
recently adopted to generate revenue from viewers who were using logins from friends and family. Iger said the company plans to roll out steps to improve monetization on that front in 2024.
Disney also announced sharp price increases for both Disney+ and Hulu. The ad-free version of Disney+ will increase 27%, to $13.99 a month, from $10.99. The price for Hulu without ads jumps 20%, to $17.99, from $14.99.
Shares initially fell 2% on the earnings news, but rebounded and more during the earnings call. They were up about 3% as of 5:30 p.m. Disney stock is roughly flat since the start of the year.
Revenue in Disney’s fiscal third quarter quarter was $22.3. billion, up 4% from a year ago. It was slightly below the Wall Street consensus estimate of $22.5 billion. Adjusted profits were $1.03 a share, six cents ahead of consensus. Under generally accepted accounting principles, the company lost 25 cents a share from continued operations. GAAP results include $2.7 billion in restructuring and impairment charges, in part to reflect content removed from streaming services.
Disney’s Media and Entertainment Distribution segment had revenue of $14 billion, down 1% from a year ago, and below consensus estimates of $14.3 billion. The Parks, Experiences and Products segment had revenue of $8.3 billion, up 13%, and ahead of consensus for $8.1 billion.
Linear networks revenue was $6.7 billion, down 7% and about in line with estimates. The direct-to-consumer business, including Disney+, posted revenue of $5.5 billion, up 9%, short of the Street’s $5.7 billion consensus. International parks business revenue jumped 94%, reflecting the fact that Shanghai Disney was open for the full quarter, compared to 3 days in the year ago quarter due to Covid-related shutdowns. Hong Kong Disneyland was open 72 days, versus 54 days in the year-earlier quarter.
The company said Walt Disney World continues to perform better than pre-Covid levels.
Iger also said on the call that it is “not matter of if but when” ESPN rolls out a direct-to-consumer option. He said the company is still considering both pricing and timing on that score. Iger also said total domestic sports ad revenue is up about 10% from a year ago.
The Disney CEO again said that the company is considering strategic options for its linear TV channels. Going forward, he said that the company’s growth will be driven by films, parks, and streaming.
Disney said it now sees content spending for the fiscal year of $27 billion, down from about $30 billion in fiscal 2022, in part reflecting the impact of the ongoing strikes by actors and writers in Hollywood. The company now sees capital spending for the full year of $5 billion, down from a previous forecast of $5.6 million.
The company also said that it expects to restore a modest dividend policy by the end of the year.
Write to Eric J. Savitz at [email protected]
Read the full article here
