Disney posts mixed results for quarter plagued by streaming woes, restructuring costs
- Subscriber losses continued over the last three months, with the company reporting 146.1 million Disney+ subscribers during the most recent quarter, a 7.4% decline.
- Disney recorded $2.65 billion in one-time charges and impairments, dragging the company to a rare quarterly net loss.
- One bright spot for the company was its parks, experiences and products division, which saw a 13% increase in revenue to $8.3 billion during the quarter.
Disney posted mixed results for its fiscal third quarter despite ongoing streaming woes and massive restructuring costs resulting from pulling content from its platforms.
Subscriber losses continued over the last three months, with the company reporting 146.1 million Disney+ subscribers during the most recent quarter, a 7.4% decline from the previous quarter and a larger loss than Wall Street expected.
The majority of subscriber losses came from Disney+ Hotstar, where the company saw a 24% drop in users after it lost out on the rights to Indian Premier League cricket matches.
Facing dwindling users and falling revenue in its media and entertainment distribution segment, Disney announced Wednesday it would raise the price on its ad-free streaming tier in October and that it would crack down on password sharing, as streaming rival Netflix did earlier this year.
Shares of Disney gained 4% in extended trading Wednesday after news of the streaming updates.
"Moving forward, I believe three businesses will drive the greatest growth and value creation over the next five years," CEO Bob Iger said on the company's earnings call. "They are our film studios, our parks business and streaming, all of which are inextricably linked to our brands and franchises."
Here are the key numbers from Disney's report:
- EPS: $1.03 per share, adjusted, vs. 95 cents per share expected, according to a Refinitiv consensus survey
- Revenue: $22.33 billion vs. $22.5 billion expected, according to Refinitiv
- Disney+ total subscriptions: 146.1 million vs. 151.1 million expected, according to StreetAccount
Disney recorded $2.65 billion in one-time charges and impairments, dragging the company to a rare quarterly net loss. The majority of those charges were what Disney called "content impairments" related to pulling content off its streaming platforms and ending third-party licensing agreements.
Disney swung to a net loss of $460 million, or 25 cents per share, for the quarter ended July 1 from a net income of $1.41 billion, or 77 cents per share, during the year-ago period. Excluding those impairments, the company earned an adjusted $1.03 per share.
Revenue increased 4% to $22.33 billion, just short of Wall Street estimates of $22.5 billion.
Segments and studios
One bright spot for the company was its parks, experiences and products division, which saw a 13% increase in revenue to $8.3 billion during the quarter. Disney saw strength at its international parks, while domestic parks, particularly Walt Disney World in Florida, saw a slowdown in attendance and hotel room purchases.
Similar slowdowns were seen by Comcast's Universal theme parks in Florida.
The rest of Disney's business has been in relative flux in recent months since Iger returned as CEO.
Linear advertising and television subscriptions are down, its movie studio has been hit or miss at the box office and Hollywood's actors and writers are on strike.
Iger said Wednesday the company would be looking to improve the quality of its studio films as well as reduce the number of released titles and the cost per title.
His comments come as Disney has struggled to gain traction with audiences at the global box office in recent months. While "Avatar: The Way of Water" and "Guardians of the Galaxy: Vol. 3" have generated more than $3 billion globally, other films have not performed as expected.
Pixar's "Elemental," which cost around $200 million to make, not including marketing costs, stalled at the box office, generating $423 million globally. Similarly, "Indiana Jones and the Dial of Destiny" cost around $300 million to produce, not including marketing costs, and has tallied just $369 million worldwide.
"The performance of some of our recent films has definitely been disappointing, and we don't take that lightly," Iger said on the call. "As you'd expect we're focused on improving the quality of the films we've got coming up. It's something I'm working closely with the studio on."
Meanwhile, Iger has hinted that Disney's TV networks, excluding ESPN — which has been searching for strategic partners and on Tuesday announced a sportsbook partnership with Penn Entertainment — "may not be core" to the business anymore.
Separately, Iger is looking to take full control of Hulu, which Disney shares ownership of with Comcast. Buying out the remaining one-third stake is expected to cost at least $9 billion before negotiations.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.
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Correction: Disney recorded $2.65 billion in one-time charges and impairments for its fiscal third quarter. A previous version misstated the figure. The company said it would increase the price of its ad-free streaming tier in October. A previous version misstated the timeline.