Disney Rallies After Streaming Surge Helps It Top Estimates
Walt Disney Co. jumped in late trading after adding more online subscribers than predicted last quarter, chipping away atNetflix Inc.’s dominance in the streaming industry.
Though the entertainment titan is still reeling from the pandemic, the growth of Disney+ has softened the blow. The company also saw gains at the ABC broadcast network last quarter, contributing to a smaller-than-expected loss. It also has increased capacity at Walt Disney World to 35% and wrung more than $2 billion in cost savings from its acquisition of Fox’s entertainment assets last year.
But the star of the quarter was Disney+, a direct-to-consumer platform that launched a year ago. It grew to 73.7 million paid subscribers, smashing the 65.5 million analysts had been anticipating. Subscribers to the Disney+ Hotstar service in India helped fuel the growth and now account for a quarter of the platform’s total.
“The real bright spot has been our direct-to-consumer business,” Chief Executive Officer Bob Chapek said on a call with investors Thursday. “It has quickly exceed our highest expectations.”
Disney shares rose as much as 7.3% to $145.45 in after-hours trading. The stock was down 6.3% this year through Thursday’s close.
Disneyreported a loss of 20 cents a share, excluding some items, in the period ended Oct. 3, compared with the 73-cent shortfall that analysts expected on average. Revenue slumped to $14.7 billion, but beatestimates as well.
Lower programming costs helped ABC through a tough stretch, boosting profit by 47%, Disney said. Including cable networks like ESPN, earnings at the media division rose 5% from a year ago to $1.86 billion, also helped by higher ad revenue. That beat Wall Street estimates for earnings of $1.26 billion.
The parks division registered a loss of $1.1 billion, slightly smaller than expected. Once a growth engine, Disney’s parks have become a drag: Properties in California remain closed and visitors to other resorts remain light, due to both virus-related restrictions and consumers’ unwillingness to travel. Its cruise ships are languishing in port.
Chapek said on Thursday that he was “extremely disappointed” that California parks remain closed, the result of a standoff with the state. Disneyland in Anaheim, California, isn’t expected to reopen this year, the company said.
Disney plans to forgo its semiannual dividend as it copes with the crisis. Last month, activist investor Dan Loeburged the company to permanently suspend the payout and redirect those funds to its streaming service.
Losses narrowed at Disney’s direct-to-consumer businesses — the home to its streaming operations — with Hulu and ESPN+ contributing to the improvement. The division is “key to the future of our company,” Chapek said Thursday.
Chapek, who became CEO in February, recentlyshook up the company’s management structure to emphasize streaming — and the reshufflingcontinued this week.
The movie studio, meanwhile, saw profit tumble to $419 million last quarter. The business has given up releasing films in theaters this year, but continues to book income from home viewing.
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