Disney + sees growth slowed as consumers leave their homes

For Walt Disney, the streaming honeymoon is over.

The world’s largest entertainment company shows a significant slowdown in the number of new subscribers to its flagship streaming service in the last quarter, putting an end to two years of strong growth that has helped it survive Covid- 19 and to extend its media dominance into homes.

Disney + said it gained just over two million subscribers in the fiscal fourth quarter ending October 2, bringing its total to 118.1 million. However, analysts had anticipated a total of 125.3 million subscribers for the end of the quarter. During the previous quarter, Disney + had garnered more than 12 million new customers.

Disney CEO Bob Chapek said the company is running its B2C business « with a long-term view, not quarter-to-quarter. » The service remains focused on its previously envisioned goal of reaching between 230 million and 260 million paying Disney + subscribers worldwide by the end of fiscal year 2024, it argues.

Disney shares, down 3.7% year-to-date, fell more than 4% to $ 167 per non-session share.

While Disney’s streaming service suffered, the parks were showing an increase in revenue over last year as attractions reopened and Covid-19 vaccination became widespread, reflecting a change in consumer habits in recent months as the global economy recovers from the pandemic.

The lockdowns have accelerated Hollywood’s trend towards direct-to-consumer options – winning Wall Street membership – but after more than a year of frustrated demand for live experiences, Disney and d other media companies must now learn to combine old sources of revenue with new ones.

One need only look at Disney’s record to see that the world is yearning to return to pre-pandemic normalcy. Revenues from theme parks are up 99%. The growth of the group’s media division is in part due to advertising revenue that accompanies the return of live sports, the company explains. And the quarter’s box office revenue came from four new films, including Shang-Chi and the legend of the ten rings, while the corresponding quarter last year saw the release of only one film.

Meanwhile, Chapek said the physical and digital worlds of his business merge into each other. Visitors to Disney parks are invited to download apps and tools that create an itinerary for the day, and where people can order food and buy souvenirs, and the company streams movies and series about young and old alike. screens.

“Our current businesses are just the prologue to a time when we will be able to connect the physical and digital world even more intimately, which will allow stories to be told without any boundaries between the two in our Disney metaverse, ”he explains.

Either way, all eyes will remain on the slowdown in Disney’s streaming business, which should disappoint investors, as Chapek predicted last September.

This relatively flat growth can be explained by several factors. In India, subscribers were not as numerous as expected following the postponement of the Indian Premier League cricket tournament which was to be broadcast by the service. Distribution in parts of Latin America has been complicated by deployment issues. And the first seasons of some star series like WandaVision and Falcon and the Winter Soldier were completed at the beginning of the year.

Competitors like Netflix have also seen their post-pandemic growth slow as deconfinements and as consumers leave their homes to be entertained.

At Netflix, reports of falling new subscriptions at the start of the year were followed by an unexpected better in the last quarter. The streaming service has 4.4 million new subscribers – about a million more than expected – thanks to new blockbuster series like Squid Game.

Disney needs to deliver more big hits, and production delays linked to the coronavirus continue to wreak havoc on its release schedule. The rate of releases that Disney + aspires to is unlikely to materialize until the fourth quarter of next year according to Christine McCarthy, the company’s chief financial officer, who adds that she expects this to help push the numbers up. subscriptions in the second half of 2022.

« The dam will eventually give way » to free the usual films and series, believes Mr. Chapek.

Some analysts are wondering if Disney should open up to more adult-oriented programs in order to attract new subscribers. Mr. Chapek says that while the leadership team is targeting new demographics, they are currently focusing on customers under the age of six.

To boost its growth, Disney recently introduced a discounted offer for Disney +, a promotion of $ 1.99 in the first month followed by $ 7.99, the regular price, in subsequent months. A “Disney + Day” promotional day is also planned for the end of the week in order to highlight the new programming of the platform, as well as to commemorate its launch in several markets abroad which should play a key role in reaching its Goals.

To attract subscribers, Disney + will rely in November and December on a documentary on the Beatles, The Beatles: Get Back, on new series from Marvel Studios and Lucasfilm as well as on several films including a new Mom I missed the plane.

As for its other streaming services, ESPN + reached 17.1 million subscribers, compared to the 14.9 million the company had in August, a figure higher than expected. Total subscriptions to Hulu increased by about two million to add to the 43.8 million in the third quarter, less than forecast by specialists.

Overall, Disney reports fourth-quarter net income of $ 159 million, or 9 cents per share, compared to a loss of $ 710 million last year around the same time, or 39 cents per share. Adjusted earnings per share stood at 37 cents per share in the last quarter, below estimates of 52 cents per share expected by specialists.

The company grossed $ 18.5 billion, a 26% increase from the same quarter last year, when the pandemic shut down much of the world. The results fell short of analysts’ estimates of $ 18.8 billion, according to FactSet data.

The theme parks and derivatives division reported operating income of $ 640 million for the quarter, following losses last year. The turnover of this sector – which includes the famous Walt Disney World and Disneyland – has doubled from last year to $ 5.45 billion. The increase in the hourly rate of pay for park employees and the inflation that affects certain supplies are the reasons for some increases in spending in this sector, explains Ms. McCarthy.

Mr Chapek recently said recent US government decisions to extend Covid-19 vaccination to younger children and reopen the country’s gates to foreign visitors should help boost parks’ turnover. . The company is also diversifying the attractions of its theme parks, with the planned opening of a Star Wars hotel at Walt Disney World which is nearly full for its first four months of opening, and adds several cruise ships to its fleet. .

Translated from the original English version