Disney+ hits 130 million subscribers, beating expectations

Disney+ added 11.8 million new subscribers worldwide in the most recent quarter to reach 129.8 million, handily beating analyst expectations, as growth at Hulu and ESPN+ pushed Disney’s portfolio of streaming services toward 200 million total subscribers.

The Walt Disney Company’s quarterly disclosure of subscriber numbers instantly eased investor concerns about slowing Disney+ growth. The service missed analyst projections in November. Disney shares rose 9 per cent in after-hours trading to about $160. Disney’s theme parks also delivered blockbuster results, the omicron variant be darned, in part because of a new paid line-skipping system.

Streaming continues to represent the greatest opportunity for growth in the entertainment business. But some of the froth has evaporated as services have proliferated, making it harder for companies to meet growth expectations and resulting in overwhelmed consumers: Some of the thrill of having thousands of shows and films at one’s fingertips is gone. Analysts have also worried that the boom that services enjoyed during the coronavirus pandemic will come to an end.

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Last month, Netflix said it added 8.3 million subscribers in its most recent quarter, instead of the projected 8.5 million, and forecast a slowdown for the current quarter compared with a year earlier. Netflix shares cratered 20 per cent, dragging down Disney and other media companies with them. Netflix has 222 million subscribers worldwide.

“There is a lot of concern in the market about streaming all of a sudden,” Michael Nathanson, a leading media analyst, said last week. “People are more negative than they have been.”

Nathanson added that Disney+ needed to offer more content for people who were not Marvel or “Star Wars” fans and who didn’t have children. Notably, one of the standout offerings on Disney+ in the most recent quarter was Peter Jackson’s documentary series “The Beatles: Get Back.” That offering alone drove 209,000 Disney+ sign-ups in its opening period (the day it was released and the two days after), according to Antenna, a research company.

Disney said it logged $4.7 billion in total streaming revenue in the most recent quarter, up 34 per cent from a year earlier. Hulu, which Disney owns with Comcast, benefited from raising subscription prices. Nonetheless, Disney’s streaming division lost roughly $600 million — about 27 per cent more than a year earlier — because of costs that included content production, marketing and technology infrastructure.

Operating profit at Disney Parks, Experiences and Products totaled $2.45 billion, compared with a loss of $119 million a year earlier, when some of Disney’s properties were closed because of the pandemic and others, including Walt Disney World, were capping daily attendance at 35 per cent of capacity. Disney cited the return of its cruise line, albeit with limited capacity, as another reason for the division’s rebound.

Higher prices at Disney parks also helped, as did the introduction of a new digital tool called Genie+ that allows park visitors — for $15 at Disney World in Florida and $20 at Disneyland in California — to drastically shorten ride wait times.

Underscoring the importance of streaming growth to Disney’s future: Operating profit at the company’s largest division, broadcast and cable television, totaled $1.5 billion in the quarter, a 13 per cent decline from $1.7 billion a year earlier. Disney attributed the decrease to higher content production and marketing costs and lower political advertising at local stations. The division includes ESPN, ABC, Disney Channel, FX, Freeform and National Geographic.

All told, Disney had $1.15 billion in profit in the quarter, compared with $29 million in the same quarter last year. When one-time items are excluded, per-share profit rose to $1.06, compared with 32 cents. Revenue was $21.82 billion, a 34 per cent increase from $16.2 million a year earlier.

After a drawn-out farewell, Robert A. Iger, Disney’s previous chief executive and executive chairman, formally left the company at the end of last year, making Wednesday’s earnings report the solo debut for Bob Chapek, who was named chief executive in 2020.

In a conference call before the earnings report, analysts said they expected Chapek to highlight the recent success of the animated musical “Encanto,” which arrived on Disney+ just before the quarter ended. “The Book of Boba Fett,” a limited series set in the “Star Wars” universe, also began rolling out on Disney+ in December, with the company hoping to build on the momentum of “The Mandalorian,” one of the service’s top performers.