- Daily Zen
The Walt Disney Co. posted Q4 earnings that missed Wall Street expectations and showed a significant slowdown in the number of new subscribers for its flagship streaming service, Disney Plus. Disney Plus reported 118.1 million paid subscribers worldwide, compared to 116 million at the end of last quarter. The earnings report caused its shares to go down as much as 9% Thursday.
Disney’s net income was $159 million in the fourth quarter, compared to a $710 million loss a year ago. Disney stock is down 1.82 percent for the year.
The subscription growth is up 60 percent from a year earlier — but below the target of 119.6 million. Analysts on average expected Disney Plus subscribers to reach 126.2 million for the quarter, according to FactSet. In September, Disney CEO Bob Chapek had warned that the media conglomerate expected the growth seen in the Covid period to slow down by a net “low single-digit millions of subscribers.” The reason cited was the delays caused in filming and producing new content due to the Covid-related lockdowns.
Streaming services might have picked up steam during the pandemic with people stuck at home and looking for entertainment, but the momentum was bound to lose speed. There is fierce competition among the popular OTT platforms such as Netflix, Hulu and HBO. Mike Proulx, research director at Forrester Research, said, “There are more choices in streaming content, and consumers only have so much budget to spend. The other factor is Covid-related production issues. There was a slowdown in the amount of original content they could put out.”
Chapek said that achieving strong growth at the streaming service was the company’s top priority as it sought to compete with Netflix. The company is increasing its long-term spending on new content for the service, which Chapek said should help boost subscriber growth in the second half of 2022. Disney is preparing a pipeline of new content ready to be streamed soon as the Covid-related delays are over. The company plans to showcase new titles for Disney Plus on Friday.
While speaking at the investors’ conference call, Chapek said he was confident that Disney would reach its target of securing 260 million global subscribers for its video streaming service by 2024.
Disney had to shut down most of its theme parks and movie theatres during the pandemic. A large number of its workforce too was laid off. But the Covid-19 vaccination drive and the opening of the economy post that has seen a slow recovery in the entertainment sector. With theatres and theme parks, and resorts operational (partially), Disney’s fourth-quarter earnings have been good. Some of its superhero films have received resounding successes, including Shang-Chi and the Legend of the Ten Rings. Theme parks, too turned in operating income of $640 million, compared to a loss of $945 million a year earlier.
Though the recovery is commendable, it still does not meet the expected targets of analysts, or the company. The company executives are talking of a “prolonged pace of recovery” in theatrical releases, which will probably affect box office results.