Disney exceeds expectations across the board, with US parks returning to profit

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Disney reported a burst of fiscal third-quarter results after Thursday’s bell, beating Wall Street’s expectations for subscriber, revenue and revenue growth.

The company’s shares rose more than 5% in after-hours trading.

  • Profit per share: 80 cents vs. 55 cents expected in a Refinitiv survey of analysts
  • Gain: $17.02 billion vs. $16.76 billion expected in the survey

The company beat subscriber estimates for Disney+ to reach 116 million. StreetAccount estimated that the company reported 114.5 million subscribers for the third quarter. The segment had $103.6 million in its fiscal second quarter.

Average monthly revenue per subscriber for Disney+ declined 10% year over year to $4.16. The company attributed the decline to a higher mix of Disney+ Hotstar subscribers compared to last year’s quarter.

Disney’s average revenue per user has shrunk in recent quarters due to lower prices for its Disney+ and Hotstar bundle in Indonesia and India. The service has lower average monthly revenue per paid subscriber than traditional Disney+ in other markets, pushing down the overall average for the quarter.

Disney also continues to experiment with viewer habits and how it releases movies after the coronavirus pandemic. The company will release “Shang-Chi” exclusively in theaters for 45 days before adding it to its streaming service.

“The prospect of being able to bring a Marvel title to service after being in theaters for 45 days will be yet another data point to inform our future actions on our titles,” CEO Bob Chapek said during the earnings call. from Thursday.

Overall, the company said it had nearly 174 million subscriptions to Disney+, ESPN+ and Hulu at the end of the third quarter. Sales for the direct-to-consumer segments increased 57% to $4.3 billion. Average monthly revenue per paying subscriber grew slightly for ESPN+ and Hulu.

Disney said the company’s total addressable market is 1.1 billion households worldwide.

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“We’ve only just started our journey and I think you can see that what’s really going to make a difference to Disney is our spectacular content, told by the best storytellers, against our powerful franchises,” Chapek said.

In an interview with CNBC’s Jim Cramer later Thursday on “Mad Money,” Chapek confirmed the company’s expectations of 230 million to 260 million subscribers to Disney+ by 2024.

“We are very confident in our sub-track,” he said. The company had ramped up its spending on content over the past year. Now, Chapek said, those movies and shows are starting to trickle in.

“Our trust only continues to grow as that content permeates our services,” he added.

Segment Parks returns to profitability

Disney’s Parks, Experiences and Products segment returned to profitability for the first time since the start of the pandemic, although the parks alone are not yet profitable.

Segment revenue increased 308% to $4.3 billion as all parks reopened during the fiscal third quarter and visitor numbers and consumer spending increased. Operating income reached $356 million, compared to a loss of $1.87 billion in the year-ago quarter.

Much of this profitability is attributable to the segment’s consumer products business, whose operating income reached $564 million. During the quarter, Disney saw increased revenue from merchandise based on Mickey and Minnie, Star Wars, Disney princesses and Spider-Man.

Disney’s domestic parks eased restrictions in April, leading to an increase in visitor numbers. Domestic Parks reported operating income of $2 million. International parks posted a loss of $210 million.

Disney had reported a loss of operating income in the segment for the past five quarters due to the Covid-19 pandemic.

“We see strong demand for our parks continuing,” Chapek said during the call.

In late July, rival Comcast, which owns and operates several Universal Studios theme parks in the US and onboard, reported that its parks have turned a profit, marking the division’s first profitable period since the first quarter of 2020.

The resurrection of the theme park industry is critical to Disney’s bottom line. In 2019, the segment, which includes cruises and hotels, accounted for 37% of the company’s total revenue of $69.6 billion.

Content sales and license revenue declined 23% in the quarter to $1.7 billion. At the same time, operating income fell 58% to $132 million.

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Correction: This story was updated to reflect that Disney’s US parks returned to profit, while the international parks did not.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal operates Universal Studios theme parks. Comcast has an interest in Hulu.

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