Disney+ subs growth slows in Q4

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The Walt Disney Company has reported earnings for its fourth quarter and fiscal year ended October 2nd 2021.

Full company revenue was as $18.53 billion (€16.17bn), whilst Disney+, its SVoD platform that has been a beacon throughout the pandemic, saw customer growth slow, but still added 2.1 million subscribers to reach a global total of 118.1 million.

The streaming service marks its two year anniversay on November 12th with Disney+ Day.

“This has been a very productive year for The Walt Disney Company, as we’ve made great strides in
reopening our businesses while taking meaningful and innovative steps in Direct-to-Consumer and at our Parks, particularly with our popular new Disney Genie and Magic Key offerings,” said Bob Chapek, Chief Executive Officer, The Walt Disney Company. “As we celebrate the two-year anniversary of Disney+, we’re extremely pleased with the success of our streaming business, with 179 million total subscriptions across our DTC portfolio at the end of fiscal 2021 and 60 per cent subscriber growth year-over-year for Disney+. We continue to manage our DTC business for the long-term, and are confident that our high-quality entertainment and expansion into additional markets worldwide will enable us to further grow our streaming platforms globally.”

Media highlights:

Domestic Channels

Domestic Channels revenues for the quarter decreased 5 per cent to $5.4 billion and operating income decreased 14 per cent to $1.4 billion. The decrease in operating income was due to decreases at Broadcasting and, to a lesser extent, at Cable.

The decrease at Broadcasting was due to lower results at ABC and the owned television stations. The decrease at ABC was due to an increase in marketing costs and higher programming and production costs, partially offset by higher affiliate revenue. The increase in programming and production costs was driven by higher average cost of acquired programming in the current quarter, partially offset by the comparison to the additional week of operations in the prior-year quarter. Affiliate revenue growth was due to an increase in contractual rates, partially offset by the comparison to the additional week of operations in the prior-year quarter. ABC advertising revenue was comparable to the prior-year quarter as the comparison to the additional week of operations and the broadcast of the Emmy Awards show in the prior-year quarter was offset by higher impressions in the current quarter, reflecting more units delivered, and increased rates. The decrease at the owned television stations was due to lower advertising revenue reflecting a decrease in political advertising in the current quarter and the comparison to the additional week of
operations in the prior-year quarter.

The decrease at Cable was due to lower affiliate revenue, an increase in marketing costs reflecting more titles premiering in the current quarter, and, to a lesser extent, lower advertising revenue. These decreases were partially offset by lower programming and production costs. Lower affiliate revenue was due to the comparison to the additional week of operations in the prior-year quarter and fewer subscribers in the current quarter, partially offset by an increase in contractual rates. The decrease in advertising revenue was due to the comparison to the additional week of operations in the prior-year quarter, partially offset by an increase in rates. Lower programming and production costs were due to decreases in costs for NBA and MLB programming, partially offset by increased costs for college football games. In the prior year as a result of Covid-19, NBA and MLB games were shifted into the fourth quarter, and college football games were shifted out of the fourth quarter into the first quarter of fiscal 2021.

International Channels

International Channels revenues for the quarter decreased 3 per cent to $1.3 billion and operating income increased 49 per cent to $140 million. The increase in operating income was due to a decrease in programming and production costs and higher advertising revenue, partially offset by lower affiliate revenue.

The decrease in programming and production costs was due to the comparison to the additional week of operations, lower write-offs in the current quarter and the impact of channel closures. These decreases were partially offset by higher sports programming costs driven by an increased number of Indian Premier League (IPL) cricket matches and soccer games in the current quarter due to the impact of Covid-19 in the prior-year quarter. Advertising revenue growth was due to an increase in average viewership, partially offset by the comparison to the additional week of operations in the prior-year quarter. Lower affiliate revenue was due to the comparison to the additional week of operations in the prior-year quarter and channel closures. Sports programming costs and average viewership reflected the impact of 18 IPL cricket matches in the current quarter compared to 16 matches in the prior-year quarter. Eight of the matches in the prior-year quarter were played in the additional week of operations.

Direct-to-Consumer
Direct-to-Consumer revenues for the quarter increased 38 per cent to $4.6 billion and operating loss increased from $0.4 billion to $0.6 billion. The increase in operating loss was due to higher losses at Disney+, and to a lesser extent, ESPN+, partially offset by improved results at Hulu.

The higher loss at Disney+ was due to higher programming and production, marketing and technology costs, partially offset by increases in subscription and Premier Access revenues. Higher subscription revenue reflected subscriber growth and increases in retail pricing. Higher Premier Access revenue was due to two releases in the current quarter, Black Widow and Jungle Cruise, compared to one release in the prior-year quarter, Mulan. The increases in costs and subscribers reflected the ongoing expansion of Disney+.


Lower results at ESPN+ were due to higher marketing and sports programming costs, partially offset by subscription revenue growth. The increase in subscription revenue was due to subscriber growth and, to a lesser extent, an increase in retail pricing.

The increase at Hulu was due to subscription revenue growth and higher advertising revenue, partially offset by increases in programming and production and, to a lesser extent, marketing costs. Subscription revenue growth was due to an increase in subscribers and higher rates driven by an increase in retail pricing for the Hulu Live TV+ SVoD service in December 2020. Higher advertising revenue was primarily due to increased impressions. The increase in programming and production costs was driven by higher subscriber-based fees for programming the Live television service due to rate increases and an increase in average monthly subscribers.

“Disney+ subscriber growth may have slowed over the last quarter, but we shouldn’t let that overshadow this young platform’s momentous achievement,” notes Charlotte Newton, Analyst on the Thematic research Team at data and analytics company GlobalData. “One slow quarter doesn’t mean that Disney+ is struggling. In fact, with 116 million paid subscribers worldwide, it is in a strong position in a pretty saturated market.”

“GlobalData estimates that subscription video on demand (SVoD) will make up 53 per cent of all pay TV accounts by 2023, hitting 1.5 billion accounts globally, and Disney is a substantial part of this growth. Furthermore, the company achieved a score of five out of five for the Internet TV theme on GlobalData’s Media, Film & TV scorecard, the same score as its main rival Netflix.”

“The platform’s Q3 subscriber growth hasn’t been great, but it remains one to watch. The number of Disney+ subscribers has grown by 60 per cent in the past year, and it is hard to argue with those statistics.”

“It is a simple formula—more original content equals greater growth in subscribers for streaming platforms. Disney understands this. By diversifying the offering on its streaming platform, Disney effectively appeals to a broader audience, rather than simply creating a Disney Channel rehash. Original content is Disney’s trump card. It offers content that fills the gaps left by its main competitors—a notable example being original sports content via ESPN+. The acquisitions of Pixar, Marvel, and other popular franchises also put Disney in a strong position as a streaming service.”

“Ultimately, Disney’s strategy of throwing money at developing content (upwards of $9 billion by 2024) to compensate for slowing subscriber growth is one that will ultimately pay off for the media giant,” she concludes.


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