Disney raises streaming prices during ad-supported tier launch, shares appear as total subscribers rise on Netflix

The Walt Disney Company added more live subscribers than expected and topped Netflix Inc.’s total. In the second quarter, it plans to launch an ad-supported category with a price increase on its current offerings before the end of the year.

Disney DIS,
+ 3.98%
On Wednesday, it announced the addition of 14.4 million Disney+ subscriptions in its fiscal second quarter for a total of 152.2 million Disney+ subscribers, and 221 million live subscribers for services that also include ESPN+ and Hulu. Those total numbers were easily higher than analysts had expected — median forecasts called for an addition of 10 million Disney+ subscribers to 147.7 million, and 217.8 million streaming customers, according to FactSet — and a total of 221 million Disney moved beyond the Netflix NFLX,
+ 6.16%And the
Which recorded 210.67 million subscribers last month.

However, there was a cautionary note during a conference call with analysts late Wednesday. Disney+ chief financial officer Kristen McCarthy has lowered the company’s expectations for Disney+, predicting that it expects to sign between 135 million and 165 million subscribers to its core Disney+ service, and up to 80 million on Disney+ Hotstar, the low-cost Asian streaming service, from postponed a range of 215 million to 245 million subscribers by September 2024. A few months ago, Disney CEO Bob Chuckle estimated that Disney’s much-stated goal of 230 million to 260 million Disney+ subscribers, set in December 2020, was “Very achievable.”

“Our quarter was stellar, with our world-class creative and commercial teams delivering outstanding performances at our local theme parks, significant increases in live sports viewing, and significant growth in subscribers to our streaming services,” Chabak said in a statement. Results.

Disney shares rose about 7% in after-hours trading as investors rejoiced at strong, comprehensive results from Disney’s live broadcasts, TV networks and theme parks.

Emphasizing confidence in its ever-popular service, Disney plans to launch an ad-supported Disney+ tier in the US on December 8, which will cost $7.99 per month, the same price Disney is currently charging for the ad-free app; The non-ad version will increase to $10.99 per month or $109.99 per year. The ad-supported Hulu tier will cost $7.99 per month starting October 10, with the premium subscription moving to $14.99 per month. Previously announced changes to ESPN+ pricing will take effect on August 23.

Disney will also continue to offer several packages from different streaming services. The Disney+ and Hulu bundle with ads will cost $9.99 per month, for example, while adding ESPN+ with ads to that bundle moves it to $12.99 per month. The premium version of the bundle, which includes Disney+, Hulu without ads, and ESPN+ with ads, will cost $19.99 per month.

“With our new ad-supported Disney+ offering and expanded set of plans across our entire streaming portfolio, we will provide greater choices to consumers at a variety of price points to meet the diverse needs of our viewers and appeal to a broader audience,” Disney CEO Karim Daniel said in a press release detailing the changes. in prices.

Disney reported fiscal third-quarter net income of $1.41 billion, or 77 cents a share, on sales of $21.5 billion, up from $17.02 billion last year. After adjusting for restructuring costs, amortization and other impacts, the company reported earnings of $1.09 per share, compared to adjusted earnings of 80 cents per share a year earlier. Analysts polled by FactSet expected adjusted earnings of 97 cents per share on revenue of $20.99 billion.

Disney’s streaming performance comes at a time when bloated consumers are pulling back from subscriptions and jumping from service to service, following an explosion in Netflix’s new streaming rivals from the likes of Apple Inc. AAPL,
+ 2.62%And the
Warner Bros. Discovery Inc. WBD,
And the
Comcast Corp. CMCSA,
+ 2.10%
and Amazon.com Inc. AMZN,
+ 3.53%.
Netflix reported a net loss of 970,000 paid subscribers in the second quarter, while analysts, on average, expected a drop of 2 million net additions. Warner Bros. announced. Discovery reported a surprise second-quarter loss of $3.42 billion.

“We are in the golden age of media, and Disney knows that consumers will continue to subscribe to something they find indispensable,” Zuora Inc. ZUO,
+ 5.24%
CEO Tien Tzuo said, commenting on the results.

Disney’s largest business segment, media and entertainment distribution, generated sales of $14.11 billion in the first quarter, up from $12.68 billion a year earlier; Analysts, on average, expected $14.2 billion. Direct-to-consumer sales, which includes streaming services as well as some international products, were $5.06 billion, compared to analysts’ expectations of $5.17 billion on average.

Disney Television Networks generated $7.19 billion in sales, while average analyst estimates called for $7.05 billion. Sales and licensing of content, a category that includes Disney’s movie business, posted revenue of $2.11 billion versus analysts’ expectations of $2.14 billion.

The company’s premium theme parks and product sales business increased to $7.39 billion in revenue from $4.34 billion a year ago. Analysts’ median estimate was $6.75 billion.

Disney stock is down 27% so far this year, but has rebounded strongly recently. S&P 500 SPX Index,
+ 2.13%
down 12% and the Dow Jones Industrial Average DJIA,
+ 1.63%And the
Which counts Disney as an ingredient, is 8% off.

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