Disney+ Loses 2.4 Million Subscribers for the First Time, Bob Iger Announces a “Significant Transformation”

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Disney+ had its first fall in member numbers since its introduction in late 2020 during the last three months of 2022, but the Mouse House’s quarterly earnings above Wall Street expectations due to a spike in income at Disney’s theme parks. After Disney’s board abruptly fired Bob Chapek in November, these numbers mark Bob Iger’s first as CEO again. Iger is trying to convince investors that the corporation has a strategy to get back on track.

In all, Disney reported fiscal year 2023’s first quarter revenue of $23.51 billion (an 8% increase) and adjusted profits per share of 99 cents. According to Refinitiv, it exceeded analyst average projections of $23.37 billion and 78 cents, respectively.

“After a successful first quarter, we are beginning on a big transition, one that will leverage the potential of our world-class creative teams and our unrivalled brands and franchises,” Iger said in a statement announcing the results on Wednesday. In our opinion, the work we are doing to restructure our business around creativity while cutting costs will result in sustained growth and profitability for our streaming business, put us in a better position to handle disruption and challenges facing the global economy in the future, and create value for our shareholders.

On the results call, Iger disclosed that Disney is cutting 7,000 positions as part of a plan to save $5.5 billion in expenditures. This represents a 3.2% reduction in its global workforce. The corporation will now be divided into three primary business sectors, overseen by co-chairs Dana Walden and Alan Bergman for Disney Entertainment, Jimmy Pitaro for ESPN, and Josh D’Amaro for Disney Parks, Experiences, and Products.

The decline in Disney+ subscribers, which was greater than analysts had anticipated, was entirely caused by a 3.8 million sequential decline in the number of subscribers to Disney+ Hotstar, the service’s version available in India and some parts of Southeast Asia, which is expected to total 161.8 million by the end of 2022. Disney cut development goals for Disney+ Hotstar in India after losing the streaming rights to Indian Premier League (IPL) cricket matches last year. Disney+ added roughly 200,000 subscribers in the US and Canada (to reach 46.6 million). ESPN+ climbed by 600,000 to 24.9 million throughout the quarter, while Hulu added 800,000 to reach 48.0 million.

While Disney’s operating loss grew 78% to $1.05 billion during the quarter, its Direct-to-Consumer revenue increased 13% to $5.3 billion. Higher content and technology costs at Disney+ (with higher average costs per hour of programming, which included an increased mix of originals) as well as higher content costs and lower ad revenue at Hulu were the causes of the higher year-over-year operating loss, which was better than analysts’ forecast loss of $1.22 billion for the DTC segment. ESPN+’s financial performance increased as a result of increasing retail prices. Disney+ is expected to become profitable in the fiscal year 2024, according to the business.

Disney was “pleased” with the first response to the ad-supported Disney+ tier, which launched on December 8 in the U.S., CFO Christine McCarthy stated on the earnings call. She said that a “significant financial effect” from Disney+ with advertisements won’t occur until later in the business’ fiscal year of 2023. We only had a de minimis loss of subscribers, according to Iger, even though the cost of Disney+ without commercials jumped in December from $7.99 to $10.99 per month in the U.S. and that reveals something to us. Disney’s linear TV networks had a 5% decline in revenue to $7.3 billion and a 16% decline in operating profitability to $1.3 billion. Regarding movies, Disney said that its theatrical release, which was dominated by Marvel’s “Black Panther: Wakanda Forever,” had greater results than titles that were released in the same quarter a year earlier.

ABC and ESPN are part of Disney’s domestic TV channel business, which had a 1% decline in revenue to $6.1 billion and an increase in operating income of 5% to $928 million. While broadcasting earnings were equal to the prior-year quarter, the increase in operating income was due to decreased expenditures for sports programming on cable. According to Disney, growth at the owned local stations from greater ad revenue was “essentially offset by weaker results at ABC.” The lack of IPL matches in the quarter contributed to a 21% decline in international channels revenue to $1.2 billion and a 64% decline in operating income to $131 million.

The Parks, Experiences and Products group, which saw revenue increase 21% to $8.7 billion and operating income increase 25% to $3.1 billion during the quarter, was Disney’s brightest spot. This was due to higher guest spending at domestic parks and experiences (and to a lesser extent at Disney’s international parks and resorts). Disney took a charge of $69 million in the quarter for quitting its companies in Russia as a result of that nation’s conflict with Ukraine.

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