Disney misses subscriber expectations, park revenue still hurt by Covid restrictions

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Disney reported second quarter results Thursday, posting lower-than-expected revenue and subscriber numbers for its streaming service.

The company’s shares fell about 3.5% in after-hours trading.

  • Profit per share: 79 cents vs. 27 cents expected in a Refinitiv survey of analysts
  • Revenue: $15.61 billion vs. $15.87 billion expected in the survey

Stream

The company missed subscriber estimates for Disney+, arriving at 103.6 million paying subscribers. According to FactSet, it was expected to be 109 million.

The streaming service had boosted the company’s success as it lost revenue due to Covid restrictions, but it appears its rapid growth is beginning to slow. Still, the company reiterated its plans to have between 230 million and 260 million subscribers to Disney+ by 2024.

“This quarter’s numbers were exactly as we forecasted internally, so no disappointment here,” CEO Bob Chapek told CNBC’s Julia Boorstin.

Average monthly revenue per user fell 29% year over year to $3.99, which the company attributed to the launch of Disney+ Hotstar. 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 CFO Christine McCarthy said during the company’s earnings call that excluding Hotstar, average revenue per paying Disney+ subscriber in the quarter would have been $5.61.

Average monthly revenue per paying subscriber grew slightly for Disney’s other direct-to-consumer platforms, ESPN+ and Hulu.

The company said it now has about 159 million subscribers on its streaming services as of the end of the second quarter. Revenue from Disney’s direct-to-consumer business grew 59% to $4 billion, helping to offset losses in other segments hit by the pandemic.

Disney announced it is also extending its MLB contract through 2028 and has signed an eight-year football deal with LaLiga.

Parks

Disney’s parks, experiences and products sales fell 44% to $3.2 billion as many of the theme parks closed or operated at reduced capacity and the cruise ships and tours were suspended.

The company said the outbreak cost this division about $1.2 billion in lost business revenue in the last quarter.

Disney recorded a $414 million one-time charge during the quarter for impairments and termination benefits for the planned closure of a Disney-branded animation studio and stores, and termination benefits paid to employees at the parks and resorts.

Disney reopened its two California parks on April 30, so any revenue generated in the past few weeks will not be reflected in its fiscal second quarter results. However, the reopening of the parks could raise expectations for the fiscal third quarter.

“We are very encouraged by the initial response from guests,” McCarthy said, adding that there are many forward-looking bookings as the number of coronavirus cases declines and vaccine numbers increase.

In addition, the Centers for Disease Control and Prevention said earlier Thursday that in most environments, both outdoors and indoors, fully vaccinated people no longer need to wear a face mask or maintain a six-foot distance from others. Chapek pointed to the new guidance as good news for the company and said in the earnings call it will be a greater catalyst for growth and presence.

“I think in a relatively short time you will see our attendance increase significantly,” Chapek later told CNBC.

As of Thursday, Disney’s Paris-based theme park is the only location not reopened to the public.

Content sales and licensing revenues were down 36% for the quarter to $1.9 billion. The award-winning “Nomadland” was Disney’s only theatrical release in the US during the quarter (it debuted on Hulu at the same time). “Raya and the Last Dragon”, Disney’s latest animated film, also debuted in a number of international theaters. It was made available on Disney+ Premier Access for $30.

Several Marvel titles are coming, such as “Black Widow,” “Eternals,” “Shang-Chi and the Ten Rings” and “Spider-Man: No Way Home,” as well as “Cruella,” “Jungle Cruise,” “Free Guy “, “Encanto” and “West Side Story.”

The company said that “Shang-Chi and the Ten Rings” and “Free Guy” will be released in theaters first, with an exclusive period of 45 days. Disney said earlier Thursday that its blockbuster “Jungle Cruise” will debut in theaters and on Disney+ Premier Access on July 30.

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