Disney narrows streaming losses but loses 4 million subscribers

Disney plans to expand its streaming offerings by year end with a new app that combines Disney+ with Hulu. PHOTO: AFP

LOS ANGELES – Walt Disney Company reduced streaming losses by US$400 million (S$530 million) from the prior quarter but also shed subscribers, the company reported on Wednesday, as quarterly earnings landed in line with Wall Street expectations.

Shares of Disney fell 4.2 per cent to US$96.90 in after-hours trading on Wednesday.

The entertainment giant planned to expand its streaming offerings by the end of 2023 with a new app that combined the family-friendly Disney+ and the Hulu general entertainment service, chief executive Bob Iger said.

The new app would streamline the viewing experience for subscribers and open more opportunities for advertisers, he said.

An ad-supported option would also be added to Disney+ in Europe by the year end.

“We have only just begun to scratch the surface of what we can do with advertising on Disney+,” Mr Iger said on a conference call with analysts.

A price increase and reduced marketing expenses helped improve the January-to-March performance of Disney’s streaming unit, which ended the quarter with an operating loss of US$659 million. In the prior quarter, the division lost US$1.1 billion.

At the same time, total subscribers to the flagship Disney+ service dropped by four million to 157.8 million.

Most of the defections came from the Disney+ Hotstar offering in India after it lost streaming rights to Indian Premier League cricket matches. Disney also shed 300,000 customers in the United States and Canada, where it raised prices in December 2022.

Analysts had expected Disney to add more than one million customers in the quarter, Insider Intelligence analyst Paul Verna said.

Overall, diluted earnings per share came in at 93 US cents, meeting the consensus forecast of analysts polled by Refinitiv. Revenue hit US$21.82 billion, slightly above analyst projections of US$21.79 billion.

The company’s theme parks kept humming with visitors, with growth at Shanghai Disney Resort, Disneyland Paris and Hong Kong Disneyland Resort helping to lift operating income at the unit by 23 per cent from a year earlier to US$2.2 billion.

Wall Street has been pressuring media companies to make profits from the billions of dollars that they have poured into streaming in recent years to compete with Netflix.

Still, investors appeared “fixated on subscriber net additions”, said PP Foresight analyst Paolo Pescatore. “Striking a fine balance between customer acquisition versus financial performance is no easy feat.”

Mr Iger, who came out of retirement in November 2022 to tackle the company’s challenges, announced a revamp in February that included a promise of eliminating US$5.5 billion in costs, partly through 7,000 job cuts.

On Wednesday, he said the company would exceed the US$5.5 billion figure.

As Disney tries to build up streaming, its traditional television business faces big hurdles.

Operating income at linear networks dropped 35 per cent from a year earlier to US$1.8 billion, partly from higher sports programming and production costs related to the College Football Playoff and the National Football League at ESPN, and lower advertising revenue at ABC network and at its own television stations.

Mr Iger addressed the ongoing legal battle with Florida Governor Ron DeSantis, questioning whether state politicians wanted Disney to expand its presence in the state.

“The question is, does the state want us to invest more, employ more people and pay more taxes, or not?” Mr Iger said during the company’s investor call. REUTERS

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