Disney+ adds 7.9m subs in Q2
May 12, 2022
The Walt Disney Company has reported earnings for its second fiscal quarter ended April 2nd 2022.
Revenues for the quarter and six months grew 23 per cent and 29 per cent, respectively, despite a $1 billion (€0.96bn) reduction for the amount due to a customer to early terminate licence agreements for film and television content delivered in previous years in order for the company to use the content primarily on direct-to-consumer services.
Other financial highlights include:
- Diluted earnings per share (EPS) from continuing operations for the quarter decreased to $0.26 from $0.50 in the prior-year quarter. Excluding certain items, diluted EPS for the quarter increased to $1.08 from $0.79 in the prior-year quarter.
- EPS from continuing operations for the six months ended April 2, 2022 increased to $0.89 from $0.52 in the prior-year period. Excluding certain items, EPS for the six months increased to $2.14 from $1.11 in the prior-year period.
“Our strong results in the second quarter, including fantastic performance at our domestic parks and continued growth of our streaming services – with 7.9 million Disney+ subscribers added in the quarter and total subscriptions across all our DTC offerings exceeding 205 million – once again proved that we are in a league of our own,” said Bob Chapek, Chief Executive Officer, The Walt Disney Company. “As we look ahead to Disney’s second century, I am confident we will continue to transform entertainment by combining extraordinary storytelling with innovative technology to create an even larger, more connected, and magical Disney universe for families and fans around the world.”
Disney Media and Entertainment Distribution
Linear Networks revenues for the quarter increased 5 per cent to $7.1 billion, and operating income decreased 1 per cent to $2.8 billion.
Domestic Channels revenues for the quarter increased 8 per cent to $5.8 billion, and operating income increased 3 per cent to $2.3 billion.
International Channels revenues for the quarter decreased 3 per cent to $1.3 billion and operating income decreased 30 per cent to $0.2 billion.
Direct-to-Consumer revenues for the quarter increased 23 per cent to $4.9 billion and operating loss increased $0.6 billion to $0.9 billion. The increase in operating loss was due to higher losses at Disney+ and ESPN+ and lower operating income at Hulu.
Lower results at Disney+ reflected higher programming and production, marketing and technology costs, partially offset by an increase in subscription revenue. Higher subscription revenue was due to subscriber growth and increases in retail pricing. The increases in costs and subscribers reflected growth in existing markets and, to a lesser extent, expansion to new markets.
Lower results at ESPN+ were due to higher sports programming costs and a decrease in income from UFC pay-per-view events, partially offset by an increase in subscription revenue due to subscriber growth. Lower UFC pay-per-view income was due to a decrease in average buys per event.
The decrease at Hulu was due to higher programming and production, marketing and technology costs, partially offset by subscription revenue growth and higher advertising revenue. The increase in programming and production costs was primarily due to higher subscriber-based fees for programming the Live TV service due to the carriage of more networks, an increase in the number of subscribers and rate increases. Subscription revenue growth was due to an increase in subscribers and higher average rates primarily due to increases in retail pricing. The increase in advertising revenue was due to higher rates and impressions.
The average monthly revenue per paid subscriber for domestic Disney+ increased from $6.01 to $6.32 due to an increase in retail pricing and a lower mix of wholesale subscribers, partially offset by a higher mix of subscribers to multi-product offerings.
The average monthly revenue per paid subscriber for international Disney+ (excluding Disney+ Hotstar) increased from $5.14 to $6.35 due to increases in retail pricing.
The average monthly revenue per paid subscriber for Disney+ Hotstar increased from $0.49 to $0.76 due to launches in new territories with higher average prices and higher per-subscriber advertising revenue, partially offset by a higher mix of wholesale subscribers.
The average monthly revenue per paid subscriber for ESPN+ increased from $4.55 to $4.73 primarily due to an increase in retail pricing and, to a lesser extent, higher per-subscriber advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.
The average monthly revenue per paid subscriber for the Hulu SVoD Only service increased from $12.08 to $12.77 due to an increase in retail pricing and, to a lesser extent, higher per-subscriber advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.
The average monthly revenue per paid subscriber for the Hulu Live TV + SVoD service increased from $81.83 to $88.77 due to an increase in retail pricing and higher per-subscriber advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.
Disney Parks, Experiences and Products
Disney Parks, Experiences and Products revenues for the quarter increased to $6.7 billion compared to $3.2 billion in the prior-year quarter. Segment operating results increased by $2.2 billion to income of $1.8 billion compared to a loss of $0.4 billion in the prior-year quarter. Higher operating results for the quarter reflected increases at domestic parks and experiences businesses and, to a lesser extent, at international parks and resorts and merchandise licensing businesses.
Ben Bilsland, partner and Media and Technology senior analyst at RSM UK, commenting on Disney’s report and the wider future implications facing the industry and end-user, said: “The streaming marketplace is becoming increasingly competitive as the number of options available to households broadens and the choice of content within these platforms deepens. Whilst the monthly cost of a household streaming account still equates to a few coffees, it is inevitable that this cost will be brought into sharp focus as food, energy and travel expenses continue to rise sharply.”
“Disney’s growth in streaming follows Netflix’s announcement of a net loss of 200,000 subscribers for the quarter, with further losses in the future. As competition heats up, content will be key for these global media companies who have repeatedly looked to the UK’s world leading film and TV production industry. The British Film Institute (BFI) has reported that £1.85 billion was spent on movies and high-end television in the UK for Q1 2022 – the highest quarterly amount on record. Commissions from global companies is key, with £1.63 billion attributed to inbound investment. Netflix has indicated that it will scale back its global production spend ($3.6 billion cash outflow in Q1 2022), any reduction in content spend could have a significant impact on the UK.”
“With the removal of UK lockdown restrictions, cinema lovers may divert their spending from streaming and return to the cinema. The UK Cinema Association reported attendance levels of 27.753 million in Q1 2022. Although not quite the levels of pre-pandemic attendance of 35.847 million in Q1 2020, it is a good sign nonetheless as the industry emerges from a very challenging period with the closure of cinemas and delays to productions due to Covid disruptions and lockdowns.”