Disney streaming beats Wall Street targets, earnings miss

Disney streaming beats Wall Street targets, earnings miss

(Corrects hurricane name in paragraph 11, timing of $1 billion cost in paragraph 15)

By Dawn Chmielewski and Lisa Richwine

– Walt Disney Co said on Tuesday that its major streaming service, Disney+, gained more subscribers than Wall Street had expected, but investment costs dragged quarterly revenue below analysts’ estimates.

Shares in Disney fell 5% in after-market trading.

The entertainment company is spending billions to compete with Netflix Inc and others for streaming TV customers as traditional TV declines in popularity. Disney+ reported 164.2 million subscribers in its fiscal fourth quarter, beating the Factset estimate of 161 million.

The costs of building Disney’s streaming business led to a $1.5 billion loss in the direct-to-consumer unit, which hurt quarterly earnings.

Net income from continuing operations rose 1% to $162 million. Excluding some items, Disney earned 30 cents a share, missing Wall Street’s target.

Revenue of $20.15 billion for the July-September quarter also fell short of the consensus estimate of $21.25 billion.

Disney has amassed a total of 235 million subscriptions across Disney+, Hulu and ESPN+ streaming services, a gain of 14.6 million from the previous quarter. Hulu reported 47.2 million subscribers, up 8% from a year ago, and ESPN+ logged 24.3 million, a gain of 42% from the previous year, and Disney+ is up 39% from a year ago.

The company repeated comments in August that losses from its direct-to-consumer business would peak in fiscal year 2022, which ended Oct. 1.

“We expect our DTC The operating losses will be reduced going forward and Disney+ will still achieve profitability in the financial year 2024, says CEO Robert Chapek. “Assuming we don’t see a meaningful shift in the economic climate.”

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The ad-supported version of the Disney+ service launches in the US on December 8, providing a new source of revenue to underwrite the billions the company spends creating original movies and series for the services. Macquarie Research analyst Tim Nollen estimates that the ad level could generate an additional $800 million in ad sales next year.

Disney theme parks had strong growth despite COVID-19 related travel restrictions in China and Hurricane Ian forcing the temporary closure of Walt Disney World in Florida in September.

Disney’s parks, experiences and products group reported revenue of $7.4 billion in the quarter, beating analysts’ forecasts. Operating income reached $1.5 billion, more than double a year ago.

Nollen wrote that higher prices, and the technology Disney uses to distribute demand, has resulted in a 40% increase in spending per person since 2019.

For the fiscal year, Disney reported earnings per share of $3.53, excluding certain items, on revenue of $82.7 billion.

In its fiscal second quarter, Disney said it recognized $1 billion in lost revenue in the second quarter from terminating a movie and TV contract early so it could use content on its own streaming services.

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