Disney Reports Jump in Disney+ Subscribers

Walt Disney Co. eported better-than-expected subscription numbers for its Disney+ streaming service in the most recent quarter, avoiding a slowdown that dogged streaming rival Netflix Inc, reports The Wall Street Journal..

For the company’s fiscal second quarter, Disney reported 7.9 million new Disney+ subscribers to reach 137.7 million subscribers, up from 129.8 million in the prior quarter. Analysts polled by FactSet had expected the company to add 5.2 million net new subscribers to the platform, for a total of about 135 million.

Chief Executive Bob Chapek reaffirmed Disney’s targets of signing up between 230 million and 260 million subscribers to Disney+ and having the streaming video-on-demand business achieve profitability by September 2024, saying both goals were “very achievable.”

Chapek said the company hasn’t yet tapped into swaths of potential new subscribers and pointed to the company’s slate of new TV and film offerings this year as the main driver of new paying customers. Disney also plans to introduce an advertising-supported version of Disney+ later this year at a lower price point than the ad-free version.

The world’s largest entertainment company posted earnings of $470 million, or 26 cents a share, for the second quarter, down from $901 million, or 49 cents a share, a year earlier. Adjusted earnings were $1.08 a share, below analysts’ expectations of $1.19. Revenue for the quarter was $19.25 billion, compared with $15.61 billion a year earlier.

Disney launched the new Marvel Studios series “Moon Knight” earlier this year, and Mr. Chapek highlighted what he described as popular offerings among the more mature entertainment content on Disney’s Hulu platform, such as reality show “The Kardashians” and “Pam and Tommy,” a series about the release of a celebrity sex tape.

Bob Chapek

Despite the better-than-anticipated subscriber growth, Disney saw losses widen dramatically at its direct-to-consumer segments, which also include the general entertainment streaming platform Hulu and streaming sports network ESPN+. Operating losses grew to $887 million in the quarter, compared with $290 million in the same period one year ago.

In a conference call following the release of the results, analysts pressed Chapek about the high cost of acquiring new customers for Disney’s streaming platforms. Spending on programming, production and marketing on content rose in the quarter, Chapek said, with roughly one-third of Disney’s $32 billion content budget this year devoted to acquiring sports rights.

“It’s obviously a balancing act, but we believe that great content is going to drive our subs, and those subs…are going to drive our profitability,” Mr. Chapek said.

Before Wednesday’s report, Disney shares were trading at two-year lows, and had fallen more than 30% so far this year. The reasons for Disney’s nosedive have been threefold, analysts say: fears of a looming recession, overall stock market volatility and worries about the profitability of streaming.