Like Netflix, Disney has fallen short in the market’s eyes on subscriber numbers for its streaming service, Disney +.
Disney’s March quarter report, out Thursday in the US revealed it had 103.6 million paid subscribers. It was expected to post 109 million by analysts.
The number was up only 8 million from the 95 million at the end of 2020.
Netflix had been looking to add 6 million new subscribers in the first quarter, it added only 3.98 million and trimmed its forecast this quarter to two million (because the June quarter in 2020 was so strong).
That made the market unhappy and judging by the reaction to the Disney filing, the initial reaction is similar.
It was only in March at the company’s annual meeting that the company announced that Disney+ had surpassed 100 million subscribers about 16 months after its launch.
Revenues of $US15.6 billion fell 13% and were under analysts forecasts who had been looking for $US15.87 billion. Net profit for the quarter rose to $US912 million from $US468 million.
Cashflow – a key measure for a company which uses cash in so many of its businesses, slumped to $US1.39 billion for the quarter, from $US3.1 billion. That’s a better guide as to the continuing damage Covid and the lockdowns are doing to the company in early 2021.
The news saw Disney shares drop more than 3% in after-hours trading after ending up 0.4% in Thursday’s positive session for most stocks.
The weaker than forecast streaming figure is important because investors say it’s the only growth option for the world’s biggest media company whose other businesses face continuing problems from Covid, social restrictions and higher costs.
Including ESPN and other streaming services, Disney said it had a total of 159 million subscribers at the end of the March quarter – still way short of Netflix’s 204 million
The Disney + streaming service had been bolstering the company’s success as it its existing businesses in theme parks, merchandise, cruises, hotels and movies were battered by the Covid pandemic and associated restrictions.
Analysts say that, with Netflix also seeing a big slowdown in March quarter subscriber numbers (because of the big rise a year ago), it seems the rapid growth is starting to slow.
Average monthly revenue per user dropped 29% year over year to $US3.99, which the company attributed to the launch of its Disney+ Hotstar.
The service has lower average monthly revenue per paid subscriber than traditional Disney+ in other markets, pulling down the overall average for the quarter.
Revenue for Disney’s direct-to-consumer business grew 59% to $US4 billion which was the most significant growth seen in the quarterly results.
Revenue at Disney’s parks, experiences and products segment slumped 44% to $US3.2 billion, as many of its theme parks, hotels etc either closed or operating at reduced capacity and its cruise ships and guided tours were suspended.
The company said the outbreak cost this division around $US1.2 billion in lost operating income during the latest quarter.
Disney recorded a one-time $US414 million charge during the quarter for impairments and severance for the planned closure of an animation studio and Disney-branded retail stores, and severance paid to workers at its parks and resorts businesses.
Disney reopened its two California-based parks on April 30 and any revenue from this will be taken this quarter (a year ago this quarter was very weak because of the lockdown). As of Thursday, Disney’s Paris-based theme park is the only location that has not reopened to the public.
Content sales and licensing revenues fell 36% for the quarter to $US1.9 billion (Oscar winner Nomadland was the only Disney movie released into cinemas in the quarter).
Netflix shares remain around $US80 under the level they were at before its first quarter filing (around $5.64). It’s a FAANG, Disney ain’t. Disney is an analogue media business with the streaming future tacked on – and with a lot of debt $US50.9 billion at the end of March, down from just over $US52 billion a year earlier.
