Robert A. Iger
In its latest earnings report, The Walt Disney Company revealed that its flagship streaming service Disney+ lost a net 2.4 million subscribers in the last three months of 2022, which marks the first decline of the platform since launching in 2020. Nevertheless, the results are better than expected, as the company had forecasted a net loss of more than 3 million.
The drop in streaming subscribers for the platform, which now stands at 161.8 millon, was driven by a 3.8 million sequential decline for Disney+ Hotstar, the version of the service offered in India and Southeast Asia. In North America, Disney+ gained about 200.000 subscriptions, reaching 46.6 million. Meanwhile, Hulu added 800.000 subscribers in the period to stand at 48.0 million, and ESPN+ increased by 600.000 to 24.9 million.
Direct-to-Consumer revenues for the quarter increased 13% to US$5.3 billion and operating loss increased $0.5 billion to US$1.1 billion. According to the company, the increase in operating loss was due to a higher loss at Disney+ and a decrease in results at Hulu, partially offset by improved results at ESPN+.
The company’s linear networks revenues for the quarter decreased 5% to US$7.3 billion, and operating income decreased 16% to US$1.3 billion. Domestic channels revenues for the quarter decreased 1% to US$6.1 billion, and operating income increased 5% to US$928 million. The increase in operating income was due to higher results at cable, while results at broadcasting were comparable to the prior-year quarter.
Overall, The Walt Disney Company reported revenue of US$23.51 billion (a growth of 8%) and adjusted earnings per share of 99 cents for the period, which was Disney’s first quarter of fiscal year 2023.
“After a solid first quarter, we are embarking on a significant transformation, one that will maximize the potential of our world-class creative teams and our unparalleled brands and franchises. We believe the work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges, and deliver value for our shareholders,” said Robert A. Iger, Chief Executive Officer of The Walt Disney Company.
● CORPORATE DEMAND SHARE
Parrot Analytics continues to view Disney as one of the best-positioned players to monetize the demand of its streaming and linear content, especially if it holds onto Hulu and buys out Comcast’s remaining stake in the platform. Above all else, Disney remains the market leader in corporate demand share — which serves as a proxy for both long-term streaming success, and short-term licensing revenue potential.
Demand for original series on Disney+ has driven Disney’s global streaming success over the last three years. Since early 2020, the global demand for Disney+ Originals has grown 380%. This has helped lead to a 390% increase in global subscribers over the same time, showing the key link between demand for original series and SVOD subscription growth.
“However, as the United States and global streaming markets approach a potential saturation point, subscriber retention will be equally critical to the long-term viability of today’s entertainment giants. This is where Hulu comes into play,” Parrot Analytics noted.
According to the research company, Hulu should be a key part of Disney’s strategy because it accounts for the most in-demand TV catalog of any other streaming service with US audiences, even beating out Netflix. Hulu is in second place in total catalog demand (TV & movies), and when combined with Disney+ would beat out both Netflix and a potential combo of HBO Max and Discovery+ for first place. Furthermore, Hulu fills in the audience demographic gaps that Disney+ currently lacks: namely, older and more female audiences.
“Regardless of whether Disney shifts Hulu into a tile on the Disney+ app or keeps it as a standalone piece of the Disney Bundle, the data is clear: demand for both exclusive and licensed content on Hulu provides immense short and long-term value to the Disney streaming and entertainment empire,” Parrot Analytics concluded.
After a solid first quarter, we are embarking on a significant transformation, one that will maximize the potential of our world-class creative teams and our unparalleled brands and franchises.” Robert A. Iger Chief Executive Officer of The Walt Disney Company