Disney+ loses another 11.7m subs
August 10, 2023
The Walt Disney Company has reported Q3 earnings with revenues at $22.3 billion (€20.2bn) – a 4 per cent growth from the previous year.
Although SVoD service Disney+ managed to significantly trim losses (down to $512 million from $1.06 billion a year earlier) subscriber numbers still saw a steep decline, falling from 157.8 million worldwide to 146.1 million – more than doubling last quarter’s record decline. The company has announced it will roll out its ad-tier plan in Europe in November.
“Our results this quarter are reflective of what we’ve accomplished through the unprecedented transformation we’re undertaking at Disney to restructure the company, improve efficiencies, and restore creativity to the center of our business,” said Bob Iger (pictured), CEO at The Walt Disney Company. “In the eight months since my return, these important changes are creating a more cost-effective, coordinated, and streamlined approach to our operations that has put us on track to exceed our initial goal of $5.5 billion in savings as well as improved our direct-to-consumer operating income by roughly $1 billion in just three quarters. While there is still more to do, I’m incredibly confident in Disney’s long-term trajectory because of the work we’ve done, the team we now have in place, and because of Disney’s core foundation of creative excellence and popular brands and franchises.”
DTC highlights
Direct-to-Consumer revenues for the quarter increased 9 per cent to $5.5 billion and operating loss decreased to $0.5 billion from a loss of $1.1 billion. The decrease in operating loss was attributed to a lower loss at Disney+, higher operating income at Hulu and a lower loss at ESPN+.
The improvement at Disney+ was due to higher subscription revenue and a decrease in marketing costs, partially offset by higher programming and production costs and lower advertising revenue. Higher subscription revenue was attributable to Disney+ Core subscriber growth and increases in Disney+ Core retail pricing. The increase in programming and production costs was due to higher costs for non-sports content, partially offset by a decrease in sports programming costs. The decreases in sports programming costs and advertising revenue reflected the comparison to IPL cricket programming in the prior-year quarter, as Disney did not renew the digital rights beginning with the 2023 season. Higher costs for non-sports content were due to more content provided on the service.
At Hulu, higher operating income included the benefit of subscription revenue growth and lower marketing costs, partially offset by higher programming and production costs and lower advertising revenue. Subscription revenue growth was due to increases in retail pricing and subscribers. The increase in programming and production costs was attributable to more content provided on the service and an increase in subscriber-based fees for programming the Live TV service, partially offset by a lower average cost mix of SVOD content. Higher subscriber-based fees for programming the Live TV service were due to more subscribers and rate increases. The decrease in advertising revenue was due to fewer impressions.
Improved results at ESPN+ were attributable to growth in subscription revenue due to increases in retail pricing and subscribers.
Linear Networks
Linear Networks revenues for the quarter decreased 7 per cent to $6.7 billion, and operating income decreased 23 per cent to $1.9 billion.
Domestic Channels
Domestic Channels revenues for the quarter decreased 4 per cent to $5.5 billion, and operating income decreased 14 per cent to $1.8 billion. The decrease in operating income was due to lower results at both Broadcasting and Cable.
International Channels
International Channels
International Channels revenues for the quarter decreased 20 per cent to $1.2 billion, and operating results decreased to a loss of $87 million from income of $166 million.
Content Sales/Licensing and Other
Content Sales/Licensing and Other revenues for the quarter decreased 1 per cent to $2.1 billion, and operating loss increased from $27 million to a loss of $243 million. The increase in operating loss was due to lower TV/SVoD and theatrical distribution results.
Reacting to the results, Oscar Wall, General Manager EMEA for Recurly, commented: “Streaming media services are reporting interesting financial results this quarter following the changing tide in consumer adoption, mixed with the highly competitive market. Some services have seen muted growth, but there are opportunities as we look ahead. A pivot for long term success and sustainable retention is key in this environment. Disney is synonymous with all ages, but they should take heed of current generational trends. A recent Recurly consumer survey highlighted the willingness to reconsider cancellations. A significant 90 per cent of Boomers would reconsider if given a reduced price, while 61 per cent of Gen Z share this sentiment. Furthermore, personalisation is a key factor for Millennials and Gen Z, with 68 per cent of Millennials and 55 per cent of Gen Z open to reconsidering subscriptions if they can tailor their plans based on their usage patterns. Disney’s proposition puts them in a good position—owning a library of media content, a strong retail brand, holidays, and parks—to offer varying and bundled services for a more personalised experience that drives growth and, subsequently, strong relationships with subscribers.”
Also responding to the results, Insider Intelligence principal analyst Paul Verna offered:”Disney’s mixed results will do little to calm investors anxious for clarity on the company’s strategy for its streaming services and TV networks. While it’s encouraging that Disney narrowed its streaming losses in the past quarter, it did so mostly through massive reductions in workforce and content spending, rather than through organic growth. Disney+ subscribers dropped for the third straight quarter, mostly driven by losses in its India business. But even in the US and Canada, Disney+ lost subscribers for the second quarter in a row. On the traditional TV side, losses continue to mount as CEO Bob Iger looks to offload what he now considers non-core assets, including the ABC Network. These adverse trends are compounded by economic uncertainty, a soft ad market, increased competition in streaming media, labor disputes with screenwriters and actors, and lackluster box office numbers for Disney’s films.”