Disney+ Losses Continue, Revenues In Line

Walt Disney Co. reported second-quarter sales and profit that were mostly inline with expectations, even as its flagship streaming service lost millions of subscribers for the second straight three-month period.

Total revenue increased 13% to $21.8 billion in the period ended April, driven by visitors to its theme parks, the company said in a statement on Wednesday. Adjusted earnings of 93 cents per share decreased 14% from the same period last year, though were in line with the consensus forecast of analysts polled by Refinitiv.

The company reported a smaller than anticipated loss in its streaming business. Disney’s direct-to-consumer segment, which includes the flagship Disney + streaming service, posted a loss of $659 million, compared to a loss of $887 million in the previous quarter, the company said.

"We’re pleased with our accomplishments this quarter, including the improved financial performance of our streaming business, which reflect the strategic changes we’ve been making throughout the company to realign Disney for sustained growth and success," Chief Executive Bob Iger said in a statement.

Disney-DeSantis Feud

Disney has been embroiled in a bitter feud with Florida Governor Ron DeSantis after coming out against the state’s bill limiting classroom discussion of sexual orientation or gender identity, dubbed “Don’t Say Gay” by critics. The company, which is among Florida’s largest employers, sued DeSantis on April 26, alleging the Republican has waged a “relentless campaign to weaponize government power” against the company.

Iger reiterated that point during the company’s earnings conference call.

“This is about one thing and one thing only,” he said. “And that's retaliating against us for taking a position about pending legislation. And we believe that in us taking that position, we are merely exercising our right to free speech.”

Streaming Losses

Its flagship streaming service, Disney+ lost four million subscribers in the second quarter, bringing the total to 157.8 million subscribers, compared to 161.8 million subs in the previous quarter, significantly missing Wall Street’s estimate of 163.17 million. Disney+ saw a drop of 2.4 million total subscribers in the first quarter.

Disney+ reported a 300,000 drop in customers in the United States and Canada in the second quarter to 46.3 million. Average monthly revenue per Paid Subscriber for the quarter increased 20% to $7.14, due to an increase in average retail pricing, the company said.

Disney shares fell as much as 3.8% to $97.28 in extended trading after the results were announced. Some investors may have been disappointed after Disney+ reported a decline in subscribers for the second straight quarter, Bloomberg reported.

Iger has been working to achieve profitability in streaming by 2024. As part of a wider plan to put Disney on a better financial footing, he’s cutting $5.5 billion in annual costs, according to Bloomberg. The company laid off several thousand workers across the company in April in the second and largest wave of cuts as part of the media giant’s previously announced plan to slash its workforce by 7,000 employees.

TV In Decline

Profit at Disney’s traditional TV business, including the ESPN cable networks and ABC’s broadcasting business, fell 35% to $1.83 billion, the result of higher sports programming costs and lower advertising, it said.

“The linear TV business is still in decline, there’s no two ways about that,” Bloomberg Intelligence analyst Geetha Ranganathan said.

International Channels revenues for the quarter decreased 18% to $1.1 billion and operating income decreased 65% to $85 million. The decrease in operating income was primarily due to lower advertising revenue, partially offset by a decrease in programming costs, the company said.

Disney Parks, Experiences and Products revenues for the quarter increased 17% to $7.8 billion and segment operating income increased 23% to $2.2 billion, the company said. “Higher operating results at our international parks and resorts were due to growth at Shanghai Disney Resort, Disneyland Paris and Hong Kong Disneyland Resort,” said.

Florida Challenged

Iger posed a question as he discussed the company’s ongoing legal feud with DeSantis. "Does the state want us to invest more, employ more people, and pay more taxes, or not?" he said.

The governor and his allies targeted the Reedy Creek Improvement District, which has allowed Disney to essentially self-govern its Florida operations since the 1960s. In April 2022, the Florida Legislature passed a law abolishing the RCID and other special districts formed before November 5, 1968.

Disney announced in April plans to invest billions of dollars over the next 10 years to revamp Walt Disney World Resort. It plans to invest over $17 billion in the Florida theme park, a move that will create an estimated 13,000 new jobs directly and thousands indirectly.

That “is what the state should want us to do,” Iger said.