Disney+ kept its momentum fully charged as the streamer handily topped Wall Street growth forecasts for the March 2022 quarter.
Disney’s flagship streamer gained 7.9 million paid customers in the first three months of 2022, to stand at 137.7 million, up 33% year over year. Analysts on average expected Disney+ to net 5.2 million new subscribers, per FactSet.
The results come after rival Netflix reported a loss of 200,000 streaming subscribers for the same period and forecast a 2 million drop for Q2, leading investors to fear a sector-wide slowdown after a pandemic-fueled surge over the last two years. Disney+’s strong gains dispel that notion and suggest that the Mouse House is stealing market share from Netflix.
Overall, Disney beat on the top line but missed on the bottom. The company reported revenue of $19.25 billion (up 23%) and earnings of 26 cents per share. Wall Street on average expected Disney to post revenue of $18.91 billion and earnings per share of $1.07 for the quarter, which is Disney’s Q2 of fiscal year 2022, per Refinitiv data.
Disney’s revenue for the quarter ended April 2, 2022, took a $1 billion hit, which it said was “for the amount due to a customer to early-terminate license agreements for film and television content” delivered in previous years so that it could use the content “primarily on our direct-to-consumer services.” That could be a reference to Disney’s former licensing deal with Netflix.
Shares of Disney were down more than 3% in after-hours trading Wednesday. Amid the broader ongoing slump in U.S. financial markets, Disney stock closed down 2.3% in regular trading, to $105.25 per share — a new two-year low.
The quarterly results “once again proved that we are in a league of our own,” Disney chief Bob Chapek boasted in prepared remarks. He added, “We believe Disney+ is one-of-a-kind,” with appeal across “all four quadrants.” Chapek said Disney+ remains on track to hit 230 million-260 million subscribers by the end of fiscal 2024.
Disney’s trio of streaming services reached 205.6 million globally (a quarterly net increase of 9.2 million, driven by Disney+). As of the end of the quarter, that included 45.6 million for Hulu (up 10% year over year) and 22.3 million for ESPN+ (up 62% year over year). Disney+ subs in the U.S./Canada region netted 1.5 million in the March 2022 quarter, to 44.4 million.
Disney’s Parks, Experiences and Products segment beat analyst expectations on the top and bottom lines, primarily on the strength of the company’s domestic parks business that have reopened after pandemic. The segment’s revenue for the quarter more than doubled year over year to $6.7 billion and segment operating income came in at $1.8 billion, compared with a loss of $400 million in the prior-year quarter.
Disney’s linear TV business demonstrated some resilience on the domestic side in a choppy market but higher programming and marketing costs took a toll on Disney’s shrinking international channels group. Revenue for the international channels fell 3% year over year (to $1.29 billion) but operating income plunged 30%, to $245 million, thanks to channel shutdowns and unfavorable FX exchanges. Higher ratings at ABC and its O&O stations helped domestic linear TV revenue for the quarter improve 8% over the year-ago quarter to $5.8 billion while operating income inched up 3% to $2.3 billion.
The company’s bottom line was hurt by one-time charges, including $195 million due to the impairment of an “intangible asset” related to the Disney Channel in Russia and a $158 million non-cash loss on Disney’s investment in DraftKings.
Whereas Disney expected fiscal ’22 content spending to be as much as $33 billion, it now projects about $32 billion because of a “slightly slower cadence of spending than anticipated” during the first half of 2022, CFO Christine McCarthy said on the call.
Looking forward, Disney+ is set for a big international expansion this summer, coming to 42 additional countries and 11 territories across Europe, West Asia and Africa. The latest phase of the streamer’s rollout will begin May 18 in South Africa.
In another bid to spur streaming growth, the media conglomerate plans to launch a cheaper, advertising-supported version of Disney+, initially in the U.S. before the end of 2022. Netflix is eyeing Q4 for the rollout of an ad-supported tier.
Disney also is banking on buzzy titles coming to Disney+ to draw in new subs and retain existing ones, like “Obi-Wan Kenobi” starring Ewan McGregor (May 27) and Marvel’s “Doctor Strange in the Multiverse of Madness,” expected to come to the streaming service sometime in July. As theatergoers returned to the multiplex, “Doctor Strange 2” raked in an impressive $185 million domestically over its opening weekend (May 6-8).
(Pictured above: Disney+ original series “Moon Knight” starring Oscar Isaac)