Walt Disney on Wednesday reported the smallest rise in Disney+ subscriptions since it launched the streaming video service to take on Netflix Inc, missing Wall Street targets and driving shares down nearly 5% after hours.
Profits from Disney’s theme park division fell well short of Wall Street projections, despite the quarter being the first time all parks were open since various pandemic closures.
The stumble in both its theme parks and streaming divisions highlights the challenges Disney faces due to the pandemic, with questions remaining about how and when customers will return to public entertainment and whether that undermines watching at home.
Disney is banking on new content next year to boost streaming subscribers. Theme parks will benefit from the United States opening its borders to many vaccinated international travelers and U.S. children ages 5 to 11 getting the COVID-19 vaccine.
Disney+ picked up 2.1 million customers during the quarter, less than half the subscribers Netflix added in roughly the same period. Analysts had projected Disney+ would add 10.2 million, according to Factset estimates.
Chief Executive Bob Chapek stuck by the company’s previous forecast of 230 million to 260 million Disney+ subscribers by the end of fiscal 2024.
“The company seems to be hitting a roadblock when it comes to subscriber growth for its streaming service,” said Haris Anwar, an analyst at Investing.com. “Investors feel the company could miss its target of reaching 260 million subscribers by 2024, creating doubts that its service can create a serious challenge for the market leader, Netflix.”
As of early October, paying subscribers to Disney+ reached 118.1 million. Including Hulu and ESPN+, the company’s streaming customers totaled 179 million.
Disney’s streaming media division, known as direct to consumer, continued to lose money as the company paid for new programming and other costs. The unit reported an operating loss of $630 million in the quarter.
Overall, the media company posted diluted earnings per share of 37 cents, below analyst projections of 51 cents. Theme park division income reached $640 million, short of Wall Street projections of $942 million.
This week, Disney is offering the first month of Disney+ for $2, down from the usual $8, and other promotions.
On Friday, Disney will debut adventure movie “Jungle Cruise,” Marvel film “Shang-Chi and the Legend of the Ten Rings,” a new “Home Alone” movie and a batch of other programming on streaming.
Disney also missed analysts’ estimates for quarterly revenue.
Revenue rose to $18.53 billion in the fourth quarter from $14.71 billion a year earlier. Analysts had expected $18.79 billion, according to IBES data from Refinitiv.
Net income attributable to the company was $159 million, or 9 cents per share, compared with a loss of $710 million, or 39 cents per share, a year earlier.
(Reporting by Lisa Richwine in Los Angeles and Nivedita Balu in Bengaluru; Editing by Sriraj Kalluvila and Lisa Shumaker)
