Walt Disney’s streaming business added a robust 14.6mn subscribers in the fourth quarter but the growth came at a high cost, as substantial losses weighed on the company’s profits.
The streaming service’s operating loss rose by $800mn to $1.5bn due in large part to rocketing content spending and marketing expenses. As a result, operating income at Disney’s media and entertainment group plunged 91 per cent to $83mn in the quarter.
Disney on Tuesday reported earnings of 30 cents per share, well below the Wall Street consensus of 54 cents. Overall, revenues rose 9 per cent to $20bn. Net income was $162mn, up 1 per cent from a year earlier.
Disney shares were 6.2 per cent lower at $99.90 in after-hours trading. The stock is down 36 per cent this year.
The healthy rise in Disney’s streaming subscriptions, which include Disney Plus. Hulu and ESPN Plus, brought its total number of subscribers to 235.7mn — more than the 227mn that industry pioneer Netflix expects to have by the end of this year.
Disney officials have said that this year will represent “peak losses” for its streaming business.
Disney chief executive Bob Chapek defended the spending strategy, saying in a statement that the rapid growth of Disney Plus is “a direct result of our strategic decision to invest heavily in creating incredible content and rolling out the service internationally”.
He added that streaming losses will begin to “narrow”, with Disney Plus expected to turn its first profit in 2024, barring a “meaningful shift” in the economy.
Disney will raise the price of its streaming services and introduce a new advertising-supported tier to Disney Plus next month — steps that Chapek said will lead to a “profitable streaming business” in the future. Netflix launched an ad-supported service last week.
The company’s theme parks continued to rebound from their coronavirus pandemic lows. Operating income at the theme parks more than doubled to $1.5bn, and revenue rose 36 per cent to $7.4bn despite the impact of Hurricane Ian.