It was a smoke and mirrors earnings call for Disney on Wednesday, which focused on the stellar performance of the Parks segment and the surge in Disney+ subscribers. But the part that often gets swept under the rug is what all those new subscribers actually cost, and what their long-term potential will be.
Much hope was riding on the conference call given that Disney’s stock price is near its 52-week low. And, indeed, it appeared at first that this could be a turning point… until investors started looking deeper at the financials, which show that most of the growth in streaming subscribers are from overseas and that their average monthly spend is a tiny fraction of US subscribers.
Disney’s streaming services added nearly 8 million subscribers quarter over quarter. But a little more than half of those subscribers are from India’s Hotstar (which is merged in with Disney+ in the country). The average Disney+ subscriber in the US is paying approximately $6.35 per month, but the new Hotstar users pay an average of just 76 cents per month.
Disney+ will roll out an ad-supported pricing plan by the end of the fiscal year, possbily as a hedge to prevent the loss of subscribers if they decided to pull a Netflix and raise prices (Netflix lost 200,000 subscribers in the quarter due in part to price increases).
Worse, Disney’s streaming services lost $887 million in the quarter, which was a massive increase over the $290 million loss in the same quarter last year. Disney’s streaming services have lost approximately 1.5 BILLION in the first 6 months of the fiscal year.
At the end of the day, the parks have more than doubled their operating income, due to all the US parks being open for the entire quarter compared to last year, plus increased attendance, increased prices, and new services (such as Genie+ and Lightning Lane).
Though, it should be noted that stormclouds from inflation, war, and continuing impacts from a pandemic could prove to be trouble for Disney Parks in the coming months. And while subscribers are up for Disney’s streaming services, so are losses for the unit. Disney’s overall revenue per share did not meet analyst expectations of $1.19 and came in at $1.08. Disney’s stock closed the day down 2.3% near its 12-month low. Disney is now the worst-performing stock of the 30 companies tracked by the Dow Jones Industrial Average.
Things aren’t always as they appear at Disney. Disney+ may certainly start making a profit in the future. But it’s hard to imagine at the moment when most of the new subscribers are making the company less than a dollar a month.
Meanwhile, the company will need to be propped up by the Parks, Experiences and Consumer Products division, which continues to soar. But even Disney’s golden goose is under threat from within, as thousands of creatives and decisions makers are fleeing the company to avoid the forced move of the unit to Lake Nona Florida. The impact of those losses will be felt in the quarters to come.
Keep your hands inside the vehicle at all times, this is indeed an unprecedented wild ride for the Disney company, as they attempt to remake ALL of their divisions all at once under the leadership of a new CEO, Bob Chapek.