As Netflix manages to climb its way out of the poor earnings reports that plagued it earlier this year, it seems Disney+ may be the next to hit a rocky patch, despite an impressive subscriber surge. Our local industry expert and entertainment lawyer, Brandon Blake of Blake & Wang P.A, analyzes the situation.
Unlike Netflix, the heart of the matter was not a subscription fall. Instead, we see Disney+ surge to 164.2M global subscribers. This puts them well on-track to make their 300M-350M subscribers by 2024 goal, and represents 12.1M new subscribers onboarded. Hulu reached 47.2M and ESPN+ reached 24.3M. All in all, the company now has 235.7M direct-to-consumer subscribers. 2024 should see them break into profit territory.
So what put Wall Street’s back up? Disney also posted a total revenue of $20.15B for the period ending September this year, representing a 9% increase on the same quarter last year. However, earnings per share dropped to 30 cents a share, 19% less than their last posted result. This misses the mark on predicted earnings for the quarter, too, which was an EPS of 56 cents and $21.44B. This earnings miss saw shares drop by up to 7% through the after-hours trading, closing at $99.90
Echoing Wider Trends
With the streaming bubble fostered by the pandemic climate now burst, Wall Street are looking for streamers to demonstrate their wider viability as profit-drivers, not merely financing subscription growth through debt. LIkewise, we’ve seen many media stocks take a beating in recent months- for Disney, particularly, its stock value has dropped about one third from the start of the year.
While their Experiences and Parks division continues to drive their profit nicely, especially with the live-event comeback this year, the Media and Entertainment Division overall is struggling to maintain revenue intake. However, direct-to-consumer revenue has increased to $4.9B, an 8% upward jump. Operating losses also increased, capping at $1.5B (a $800M) increase. Both Disney+ and Hulu have seen reduced revenue, with some lost ground made up by the popularity of ESPN+ and the live sports streaming growth we’ve seen this year.
Notably, that painful $1.5B is predicted to be the peak loss for the streamer, but clearly analyst’s aren’t impressed. Likewise, there was a noted decline in their Linear Networks unit, in line with global trends. In particular, their International Channels declined by 18% to $1.1B, with a similar fall in operating income.
It’s unusual to see a stock price hit in this quarter, given they had spottier reports earlier this year and are now hitting a patch of strong momentum. For the most part, they are blaming their rapid growth, and a willingness to invest heavily in content and service rollouts for the future. Will this be a once-off blip or, like Netflix, will there be more stock price drama in the future? For now we have to wait and see.
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