Disney+ Just Lost Millions of Subscribers

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Disney+ lost 2.4 million subscribers in the last three months of 2022, marking its first decline since launching late in 2019, while Disney's theme parks logged a record quarter as revenues climbed, Variety reported. The company's results mark Bob Iger's first as CEO since the board removed Bob Chapek in November. Iger is seeking to reassure investors that the company is on track to recover. 

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On Wednesday, Iger announced the results, stating, per Variety, "After a solid first quarter, we are embarking on a significant transformation, one that will maximize the potential of our world-class creative teams and our unparalleled brands and franchises. We believe the work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges and deliver value for our shareholders."

Refinitiv measures Disney's revenue for the quarter that ended Dec. 31, 2022 ($23.51 billion, up 8%). Disney's adjusted earnings per share were also higher, at 99 cents, compared with analyst consensus estimates of $23.37 billion and 78 cents, respectively. A sequential decline of 3.8 million Disney+ Hotstar subscribers, the version of Disney+ offered in India and parts of Southeast Asia, contributed to a bigger drop in Disney+ subscribers than analysts expected, reaching 161.8 million in 2022. As a result of losing streaming rights to Indian Premier League (IPL) cricket matches last year, Disney lowered its growth targets for Disney+ Hotstar, according to Variety. 

The U.S. and Canada saw Disney+ gain about 200,000 subscribers (to reach 46.6 million). Hulu gained 800,000 at 48.0 million, while ESPN+ grew by 600,000 to 24.9 million. Iger also said on the earnings call that the company would eliminate 7,000 jobs as part of a $5.5 billion cost reduction strategy. Additionally, he revealed that Disney would be divided into three core business segments: Disney Entertainment under the leadership of co-chair Dana Walden and Alan Bergman, ESPN under the leadership of Jimmy Pitaro, and Disney Parks, Experiences, and Products under the direction of Josh D'Amaro.

Disney's CFO Christine McCarthy said the ad-supported Disney+ tier, which debuted Dec. 8 in the United States, has received a positive response. In her view, Disney+ with ads will not have a meaningful impact on the company until the company's fiscal year 2023 ends. According to Iger, even though Disney+'s core subscription price went up in December from $7.99 to $10.99 per month in the U.S., "We only suffered a de minimis loss of subs… that tells us something." As a result of its efforts to rapidly grow Disney+, Iger suggested the company placed a greater emphasis on customer acquisition than profitability. "We were, as a company, in a global arms race for subscribers," he said on the call. "And in our zeal to go after subscribers, I think we might have gotten a bit too aggressive in terms of our promotion, and we are going to take a look at that."

One of Disney's highlights in the quarter was Parks, Experiences, and Products, which saw revenue rise 21% to $8.7 billion and operating income rise 25% to $3.1 billion due to higher guest spending at parks and attractions in the United States, and a lesser extent at Disney's international resorts and parks. During the quarter, Disney recorded a charge of $69 million related to its exit from the Russian market following the country's involvement in the Ukraine war.