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As the so-called delta variant of COVID-19 throws a wrench into moviegoing and live events, The Walt Disney Co. nonetheless beat Wall Street estimates Thursday, reporting revenue of $17 billion. The market consensus had been for revenues of $16.8 billion. Earnings per share were $0.80, blowing past the estimate of $0.55.
Disney’s stock was up more than 10 percent in after-market trading.
Disney CFO Christine McCarthy said the company would forgo a dividend for the first half of 2021. “We don’t anticipate declaring a dividend or repurchasing shares until we return to a more normalized operating environment,” McCarthy said.
The company also gave updated subscriber figures for Disney+, reporting that the streaming service added 13 million subscribers for a total of 116 million, beating Wall Street forecasts of 115 million. Last quarter, Disney reported 103.6 million Disney+ subscribers, falling short of expectations.
In fact, all of Disney’s streaming services grew significantly, with Hulu topping 39 million SVOD subs (up 22 percent year over year), and ESPN+ hitting 14.9 million subscribers (up 75 percent year over year). Average revenue per user (ARPU) continued to fall at Disney+, driven by launches in markets where the service is sold for less than in the U.S., while ARPU rose slightly at both ESPN+ and Hulu, driven by advertising and new subscribers. McCarthy says that the majority of new Disney+ subscribers were from Disney+ Hotstar. In addition, the company is delaying its launch of Disney+ in eastern Europe until summer 2022, so that it can launch alongside Middle East markets and South Africa.
The direct-to-consumer business remains the key driver for the company, with revenue of $4.25 billion, up 57 percent from the same quarter a year ago. Disney’s linear networks unit, which includes ESPN and ABC, was up 33 percent from a year ago at $2.19 billion, while its theme parks and experiences division up more than 100 percent to $4.3 billion, thanks to the reopening of Disneyland and Walt Disney World.
Higher sports, content licensing and marketing costs impacted growth at the linear channels, offset by the higher advertising revenue those events brought. At the ABC broadcast network, higher programming and production costs, “as well as incremental costs of health and safety measures since the onset of COVID-19,” impacted earnings, with higher advertising revenue offsetting that. The Academy Awards were also pushed into Q3, delivering higher advertising revenue, but “partially offset by fewer impressions, reflecting lower average viewership,” per the company.
The comparison to Q3 2020 was very favorable, as that was the first quarter last year to be completely impacted by the pandemic, which shuttered the company’s theme parks, delayed all theatrical movie releases, and saw live sports and TV productions temporarily shut down.
In fact, the company’s theme parks swung a profit for the first time since the pandemic began, drawing revenue of $4.3 billion (compared to $1 billion a year earlier), and income of $356 million, compared to a $1.9 billion loss a year ago. McCarthy said that Disney World is now “at or near capacity levels.”
On the theatrical side of the business, Disney CEO Bob Chapek hinted at the dispute over Black Widow‘s release in theaters and on Premier Access, saying “both Bob Iger and I, along with the distribution team, decided this was the best strategy because it enabled us to reach the broadest audience,” and that they wanted to take action in “what we believe is in the best interest of the film, and the best interests of our constituents.”
He added later that “we have figured out ways to fairly compensate talent” and that “since COVID has begun, we have entered into hundreds of talent arrangements with our talent, and by and large they have gone very smoothly.”
Chapek also said that Free Guy and Shang Chi would continue to have exclusive theatrical windows, noting that the company inherited a deal with Free Guy limiting their ability to stream it, and that Shang Chi “will be an interesting datapoint,” given the 45 day theatrical window, though he acknowledged the company “planned on being in a much more healthy theatrical environment.”
Overall revenues were up 45 percent year over year, with the theme parks mostly open, productions and sports back on, advertising in a rebound, and movie theaters back open and welcoming guests.
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