Disney Lost Streaming Subscribers & Announced Restructuring
Streaming Subscriber Loss
The entertainment giant's main streaming platform, Disney+, has seen meteoric rise since it first launched a little over three years ago and just before the pandemic struck. Wednesday's results revealed the first quarterly loss of subscribers, to the tune of 2.4 million. [1]
The other two streaming services, ESPN+ and Hulu, increased their user base, but not enough to offset the Disney+ losses. As such, the company relinquished 1,000,000 subscribers combined for all its three streaming services, having 234.7 million users as of the end December 31.
The firm had dethroned Netflix back in August and had widened its lead over its rival in the previously reported quarter. Yesterday's poor results narrowed the difference, but kept Disney ahead of Netflix, which had 230.75 million subscribers as per its latest results in January. [2]
Despite the user base contraction, the Direct-to-Consumer business generated higher Revenues on both yearly and sequential basis, while operating at a loss of $1.053 billion. This was much wider compared to a year ago, but was improved compared to the previous quarter.
In December, Disney had launched a new subscription plan with the inclusion of advertisements in the US, having though being undercut by Netflix by one month and one full US Dollar. During Wednesday's earnings call CFO Christine McCarthy was "pleased with the initial response". [3]
Strong Financials
Despite the subscriber loss, financials of the first quarter of Fiscal year 2023 (period ended December 31) were quite strong overall, in the first report since Bob Iger returned as CEO of the company in November.
Total Revenues increased 8% from a year ago, to $23.512 billion. Total segment operating income may have been squeezed compared to a year ago, but nearly doubled over the previous quarter, to $3.043 billion.
The Parks, Experiences and Products (DPEP) segment, which had taken the biggest hit from the pandemic lockdown, expected its recovery streak, with the eighth straight profitable quarter. Its operating Income just above $3 billion, up 25% year-over-year.
Restructuring Plan
CEO Bob Iger announced "a significant transformation" of the Walt Disney Company that includes segment changes to be implemented immediately, while reporting based on the new structure is expected to begin by the end of the current fiscal year. [3]
The new divisions will now be the "Disney Entertainment", the "Disney Parks, Experiences and Products", while the sports-oriented "ESPN" now gets its own segment. There has been some speculation around an ESPN spin-off recently, but the CEO dismissed such talk, saying that the brand continues to create "real value".
Other than that, the restructuring plan aims to make the entertainment giant more efficient and deliver cost cuts of $5.5 billion and a reduction of the workforce by 7,000 jobs.
Stock Movement
Markets looked past the subscriber losses and focused on the cost reduction plan and solid financials as Disney's stock was up around 6% at Thursday's pre-market at the time of writing.
DIS.us had lost 8% of its value in the fourth quarter of 2022, hitting the lowest level in more than two year in December. It has started 2023 on the offensive though, with year-to-date advance of almost 30%.
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 09 Feb 2023 https://thewaltdisneycompany.com/app/uploads/2023/02/q1-fy23-earnings.pdf | |
| Retrieved 09 Feb 2023 https://s22.q4cdn.com/959853165/files/doc_financials/2022/q4/FINAL-Q4-22-Shareholder-Letter.pdf | |
| Retrieved 24 Sep 2023 https://thewaltdisneycompany.com/app/uploads/2023/02/q1-fy23-earnings.mp3 |
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