By Brooks Barnes
Disney+ added 11.8 million subscribers worldwide in its most recent quarter to reach 129.8 million, handily beating analyst expectations, as growth at the Disney-owned services Hulu and ESPN+ pushed its portfolio toward 200 million total subscribers.
The Walt Disney Co.’s quarterly disclosure of subscriber numbers on Wednesday instantly eased investor concerns about slowing growth of Disney+, which had missed analyst projections in November. Disney shares rose more than 6% in after-hours trading to about $157.
Disney’s theme parks also delivered blockbuster results in the three months that ended on Jan. 1, the omicron variant be darned, in part because of a new, paid line-skipping system.
Streaming remains the greatest opportunity for growth in the entertainment business. But some of the froth has evaporated as services have proliferated, making it harder for companies to meet growth expectations and resulting in overwhelmed consumers: Some of the thrill of having thousands of shows and films at one’s fingertips is gone. Analysts have also worried that the boom that services enjoyed during the coronavirus pandemic will come to an end.
Last month, Netflix said it had added 8.3 million subscribers in its most recent quarter, instead of the projected 8.5 million, and forecast a slowdown for the current quarter compared with a year earlier. Netflix shares cratered 20%, dragging down Disney and other media companies with them. Netflix has 222 million subscribers worldwide.
“There is a lot of concern in the market about streaming all of a sudden,” Michael Nathanson, a leading media analyst, said last week. “People are more negative than they have been.”
Nathanson added that Disney+ needed to offer more content for people who were not Marvel or “Star Wars” fans and who didn’t have children. Notably, one of the standout offerings on Disney+ last quarter was Peter Jackson’s documentary series “The Beatles: Get Back.” That offering alone drove 209,000 Disney+ sign-ups in its three-day opening period, according to Antenna, a research company.
Bob Chapek, Disney’s chief executive, told analysts on a post-earnings conference call that the amount of “general entertainment” programming on Disney+ would increase. On Wednesday, for instance, Disney+ began offering reruns of two ABC comedies, “black-ish” and “The Wonder Years,” both of which previously streamed on Hulu.
When Disney+ was introduced in 2019, the company spent a lot of time worrying about whether certain boundary-pushing shows — ones geared toward older viewers — were appropriate to include. Early on, Disney pulled the plug on a much-anticipated “Lizzie McGuire” reboot because executives thought storylines were not child-friendly enough, for instance.
Chapek, who took over from Robert A. Iger in 2020, indicated that he was willing to think outside the box. “What we have seen time and time again is that the elasticity of Disney and its brand is much greater than we might have given it credit,” Chapek said on the conference call. He added that more than half of Disney+ subscribers do not have children.
At the same time, Chapek highlighted the recent success of the animated musical “Encanto,” which arrived on Disney+ just before the quarter ended. “The Book of Boba Fett,” a limited series set in the “Star Wars” universe, also began rolling out on Disney+ in December, with the company hoping to build on the momentum of “The Mandalorian,” one of the service’s top performers. Another “Star Wars” series, “Obi-Wan Kenobi,” will arrive on May 25.
Disney said it had logged $4.7 billion in total streaming revenue in the most recent quarter, up 34% from a year earlier, in part because Hulu, which Disney owns with Comcast, raised subscription prices. Nonetheless, Disney’s streaming division lost roughly $600 million — about 27% more than a year earlier — because of costs that included content production, marketing and technology infrastructure.
Operating profit at Disney Parks, Experiences and Products totaled $2.45 billion, compared with a loss of $119 million a year earlier, when some of Disney’s properties were closed because of the pandemic and others, including Walt Disney World, were capping daily attendance. Disney cited the return of its cruise line, albeit with limited capacity, as another reason for the division’s rebound.
Underscoring the importance of streaming growth to Disney’s future: Operating profit from broadcast and cable television, the company’s largest division, totaled $1.5 billion in the quarter, a 13% decline from $1.7 billion a year earlier. Disney attributed the decrease to higher content production and marketing costs and less political advertising at local stations. The division includes ESPN, ABC, Disney Channel, FX, Freeform and National Geographic.