Walt Disney sharply reduced its losses from video streaming in the second quarter as the company cut costs and raised subscription prices for services, including its flagship Disney Plus platform.
But Disney’s streaming business also lost 4mn subscribers in the quarter, mostly due to the loss of Indian Premier League cricket on its Hotstar service in India. Disney shares fell more than 4 per cent in after-hours trading.
Since he returned to the company in November, Bob Iger, Disney chief executive, has been under pressure to stop the bleeding of cash at its streaming services, as investors lose patience with the growth-at-all costs investment into streaming by the company and its rivals. Disney has pumped more than $10bn into its streaming business since launching in 2019 as it went head-to-head with Netflix.
On Wednesday Disney announced that it had reduced streaming losses by 26 per cent from a year earlier to $659mn in the quarter ended April 1 — better than the $850mn loss Wall Street had expected and a $400mn improvement from the prior quarter. Streaming revenue increased 12 per cent from a year earlier, thanks in part to a rise in subscription fees.
Disney said it had achieved the streaming savings in part by cutting marketing costs, though company executives said those costs would increase by $100mn in the current quarter because of the timing of new releases.
Though it reported a decline in total subscribers to its streaming services — which include Disney Plus, ESPN Plus and Hulu — its average revenue per subscriber rose. Iger said an increase in subscription prices only led to a “de minimus” loss of subscribers of about 300,000.
“That leads us to believe that we, in fact, have pricing elasticity,” he told investors in a conference call.
Iger said in a statement that he was “pleased” with the improvements in the streaming business, which he said “reflect the strategic changes we’ve been making throughout the company to realign Disney”. The company is in the middle of cutting 7,000 jobs, which is expected to save at least $5.5bn. It took a charge of $152mn in the quarter, “primarily for severance”.
Iger on the investor call said the company would integrate the Hulu and Disney Plus streaming services into one app later this year, which would create more opportunities for advertisers. He also appeared to back off earlier comments that Hulu’s general entertainment offering was “undifferentiated”, which had led some analysts to wonder whether he was looking to offload the company.
“That was a little harsh,” Iger said of his previous comment, adding that he was “bullish” on the combination of Disney Plus and Hulu.
He also hit back at Florida lawmakers, led by Republican governor Ron DeSantis, who have been seeking to curb its power in the state. Disney sued DeSantis and others last month, accusing them of retaliating against the company for exercising its free speech rights when it criticised the so-called Don’t Say Gay law.
“We certainly never expected to be in the position of having to defend our business interests in federal court, particularly having such a terrific relationship with the state, as we’ve had for more than 50 years,” he said. “Does the state want us to invest more, employ more people and pay more taxes or not?”
Disney earned 93 cents a share in the quarter, in line with Wall Street expectations, and $1.27bn in net profit on revenue of $21.98bn. Its theme parks continued to show strong results since pandemic restrictions were lifted, with operating income up 23 per cent to $2.1bn thanks to strong attendance at its parks in Shanghai, Hong Kong and Paris.
But revenue at Disney’s television networks fell 7 per cent in the quarter and operating income dropped 35 per cent due to lower advertising sales.