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Disney posted muted earnings last quarter (ended Sept. 30), as sluggish growth at Disney+ led the company to miss Wall Street earnings expectations. The entertainment giant posted revenue of $18.53 billion, and earnings per share of $0.37. Wall Street consensus was for an EPS of $0.51 and earnings of $18.79 billion.
Still, Disney’s overall business remains up significantly from the same quarter a year ago, when the pandemic was impacting nearly every sector of the company, from closed theme parks to light TV slates to advertisers still sitting on the sidelines.
On the company’s quarterly earnings call, CEO Bob Chapek hyped up Disney’s long history of using technology to enhance its storytelling, and threw in one of the corporate world’s latest buzzwords.
“Suffice it to say, our efforts to date are merely a prologue to a time when we can connect the physical and digital world even more closely, in our own Disney metaverse,” Chapek said.
For now, though, the direct-to-consumer business remains the most important revenue driver for the company, with revenue of $4.56 billion, up 38 percent from a year earlier. Disney’s linear networks unit, which includes ESPN and ABC, hit $6.7 billion, down 4 percent from a year ago. The company’s theme parks and experiences division up more than 99 percent to $5.45 billion, as theme park attendance at Disneyland and Walt Disney World continued to normalize. Chapek called out the approval of vaccines for kids 5-11, and the announcement that vaccinated international travelers will be permitted to come to the U.S., as potential growth drivers for the parks.
The lower results at the linear networks “was due to the shift of sports programming costs from fiscal 2020 into fiscal 2021 as a result of COVID-19, partially offset by higher sports advertising revenue,” the company said.
As previously forecast by Chapek, Disney+ subscriber growth slowed in the quarter, with the service hitting 118 million subscribers, an increase of 2 million. Disney ended fiscal Q3 with 116 million total subscribers. Chapek forecast at a Goldman Sachs conference in September that the company expected to end the quarter with “low-single-digit” subscriber growth as the company expands into new markets and works on retention, but that he was “bullish and confident” about long-term growth.
Analysts subsequently lowered their own subscriber forecasts.
Growth also slowed at Hulu and ESPN+, with Hulu adding only 700,000 subscribers to 39.7 million, and ESPN+ adding 2.3 million subscribers to 17.1 million. Disney also saw its average revenue per user (ARPU) continue to fall at Disney+, hitting $4.12 per subscriber, down 9 percent from a year ago, while ARPU at Hulu rose by 1 percent to $12.75, and ARPU at ESPN+ was up 4 percent to $4.74.
“We recognize that the single most effective way to grow our streaming platforms worldwide is with new content,” Chapek said, adding that the company is investing heavily in local and regional content, with more than 340 projects currently in he works. He added that the company’s goal is to “double the number of countries we are in to over 160 by fiscal 2023.”
Chapek also called out preschool content as a potential growth area for Disney+.
In sports, Chapek said that the company plans to have a “greater presence in online sports betting … We have the potential to partner with third parties in the space in a very meaningful way.”
In the theatrical space, Chapek said that the company is “sticking with our plan of flexibility” as the market recovers, adding that “we are watching very, very carefully different types of movies” to see how they perform, calling out the performance of family films in particular.
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