Disney will jack up the value of its streaming services and vowed to clamp down on password sharing, the corporate said Wednesday because it posted a mixed quarterly earnings report.
The increases will raise the monthly cost of ad-free Disney+ by $3, or roughly 27%, to almost $14. The price of ad-free Hulu will likewise rise $3 to almost $18 — a 20% hike that may make it dearer than the preferred ad-free tier at Netflix.
Disney CEO Bob Iger acknowledged that the value hikes are intended to steer consumers toward cheaper ad-supported versions of those services, whose subscription prices aren’t changing.
The promoting marketplace for streaming is “picking up,” he said, noting that it’s healthier than traditional TV ads.
“We’re obviously trying with our pricing strategy to migrate more subs to the promoting supported tier.”
Iger, who signed an extension to remain on the helm of the Mouse House through 2026, said he would address the difficulty of password sharing next yr, echoing Netflix.
He also acknowledged the necessity to improve the standard of Disney’s movies, to position the corporate’s flagship sports brand, ESPN, for streaming directly to consumers, and to resolve the writers’ and actors’ strikes in Hollywood which have halted much film and tv production.
Disney’s stock rose nearly 3% in after-hours trading, as Iger touted $1 billion in operating-income improvement at the corporate’s streaming business during the last three quarters, which is aiming for profitability in 2024.
His turnaround plan for the media and entertainment giant has begun to pay some dividends.
The corporate beat Wall Street’s profit expectations for its fiscal third quarter and said it was on track to cut costs by greater than the $5.5 billion it promised investors in February.
“I returned to Disney in November, and I’ve agreed to stay on longer, because there was more to accomplish before our transformation is complete,” Iger said, describing a “difficult environment within the near term.”
Nonetheless, Disney also posted quarterly revenue below expectations and fell barely behind analyst projections for U.S. subscribers of Disney+.
Disney’s revenue for the quarter ended July 1 rose 4% to $22.33 billion from a yr earlier, just wanting Wall Street estimates, according to Refinitiv. It delivered per-share earnings of $1.03, when excluding certain items, beating Wall Street projections of 95 cents a share.
The corporate took $2.65 billion in impairment and restructuring charges within the quarter, reflecting the price of removing some content from its streaming services, terminating licensing agreements and $210 million in severance payments to laid-off staff.
Disney’s Parks, Experiences and Products group reported a 13% increase in revenue within the quarter, to $8.3 billion, and an 11% bump in operating income to $2.4 billion.
The outcomes were buoyed by the rebound of the Shanghai Disney Resort, which was open for the total quarter compared with the identical time a yr ago, when COVID-19 forced the park to be closed for all but three days.
Nonetheless, the unit had lower operating income at its domestic parks, due to decreases at Walt Disney World Resort in Orlando.
The corporate has been embroiled in a bitter legal battle with Florida Gov. Ron DeSantis after opposing the state’s “Don’t Say Gay” law, which led to Disney losing its special tax status for the district overseeing the theme parks.
Disney’s traditional television business continued its decline. Higher sports programming production costs and lower affiliate revenue dragged down the performance of its cable channels. TV revenue fell 7% to $6.7 billion, while operating income fell 23% to $1.9 billion.
Disney said it cut losses at its streaming video services to $512 million in its fiscal third quarter from about $1.1 billion a yr ago.
It added 800,000 Disney+ subscribers, 100,000 subscribers shy of analyst estimates, and shed 12.5 million subscribers to the Disney Hotstar service in India, or nearly 1 / 4 of its subscribers, because it gave up rights to Indian Premiere League cricket matches.
“Disney could have to cut prices from current levels in an effort to stimulate demand and defend its market share in an increasingly competitive industry,” said Jesse Cohen, senior analyst at Investing.com.
Disney’s direct-to-consumer business reported a 9% increase in revenue to $5.5 billion, as the typical revenue per subscriber rose at Disney+ and Hulu.
Content sales and licensing, the unit that features film and tv sales, reported a deeper operating lack of $243 million within the quarter, compared with a lack of $27 million a yr ago, as some movies disenchanted, including the live-action remake of “The Little Mermaid.”
On Tuesday, Disney-owned ESPN announced that it struck a lucrative deal to rebrand an existing sports-betting app owned by Penn Entertainment as ESPN Bet. Penn Entertainment is paying $1.5 billion plus other considerations for exclusive rights to the ESPN name and can proceed to own and operate the betting app.