Disney Posts Smaller Streaming Loss, Sees Disney+ Subscriber Base Shrink
Entertainment giant’s revenue rises 3.8% on continued growth at parks unit
Disney DIS -0.73%decrease; red down pointing triangle said its streaming business lost far less money in the latest quarter than it did in previous periods, but reported that its flagship Disney+ streaming service lost domestic subscribers for the second quarter in a row.
The entertainment giant that is home to Mickey Mouse, Captain America, Buzz Lightyear and Luke Skywalker reported that losses in its streaming business narrowed to $512 million in the third quarter from $1.06 billion in the year-earlier period.
The improvement is a sign that cost controls put in place by Chief Executive Robert Iger are starting to show a positive effect: Wall Street analysts polled by FactSet had expected a quarterly loss of $758 million.
Overall, Disney’s revenue rose 3.8% to $22.3 billion, thanks in part to continued growth at the company’s parks business, while operating income remained flat at around $3.6 billion. Analysts surveyed by FactSet had projected revenue of $22.5 billion and operating income of $3.3 billion.
In a statement, Iger said Disney was on track to exceed the goal he laid out in February of cutting $5.5 billion from content and administrative budgets, and chalked up the results to efforts to restructure the company and improve efficiencies. Since the start of the year, Disney has eliminated thousands of jobs as part of an effort to reduce head count by 7,000.
“In the eight months since my return, these important changes are creating a more cost effective, coordinated, and streamlined approach to our operations,” he said. “While there is still more to do, I’m incredibly confident in Disney’s long-term trajectory.”
Shares of Disney slid 1.4% in after-hours trading to $86.20. Before the earnings results, the stock had fallen 19% over the past 12 months.
The company swung to a loss of $460 million from $1.41 billion a year earlier, mostly because of restructuring and impairment charges. Excluding certain items, Disney earned $1.03 per share outstanding, beating analyst expectations of 97 cents a share.
Disney+ had 146.1 million subscribers globally, 7.4% fewer than the 157.8 million it had in the previous quarter. The decline mostly came from India, where Disney last year lost the rights to stream a popular cricket league that had been a major driver of new sign-ups.
In the U.S. and Canada, Disney+ had 46 million subscribers, down from 46.3 million in the previous quarter. It marked the second time ever that the company saw Disney+ lose North American subscribers.
Since launching Disney+ in late 2019, the company has lost more than $10 billion in its direct-to-consumer segment, which also includes Hulu and ESPN+. For nearly three years, Disney has told investors it expects Disney+ to be profitable by September 2024.
Disney’s troubled traditional television business continued its decline. The company’s so-called linear TV segment, which includes sports network ESPN, ABC and cable channels like FX, Freeform and the Disney Channel, saw operating income fall 23% to $1.89 billion, or about $100 million less than what analysts expected.
Once a reliable engine of profit for Disney, linear TV has seen its operating income plunge in recent years as more consumers cut the cable cord and switch to streaming video as their primary source of home entertainment.
Iger recently hired Kevin Mayer and Tom Staggs, both former top lieutenants to Iger, as consultants to advise him on the TV business.
Disney is exploring a menu of options for both ESPN and its other linear networks, which include ABC and cable channels such as Freeform and Disney Channel, people familiar with the matter said. Those options could include selling some networks or bringing on equity partners, or spinning some assets off into a new company.
In recent weeks, Iger has told associates that he wants to reduce Disney’s exposure to the declining cable-TV industry but would prefer to avoid a spinoff of ESPN, and instead attract strategic partners to raise capital and ease the pressure on the business, people who have spoken with him said.
Iger is expected to speak Wednesday afternoon on a conference call with investors and analysts, who will be looking for more clarity about how to fix the TV business, said analyst Michael Nathanson. Disney’s shares have traded for much of this year under $90, a fraction of the price at which they traded about 2½ years ago, when the stock briefly topped $200.
“The market is unsatisfied so far, because we’ve only heard part of what they’re thinking,” Nathanson said. “People are afraid to buy the stock until they get the all-clear sign.”