Disney's Financial Results For Their Fiscal Q1 - Layoffs Announced

It’s that time of the year when publicly traded companies release their financial results. Yesterday Mattel and everyone’s most favorite entertainment provider Disney both released their numbers for the fourth quarter of 2022, which is Disney’s first quarter of their fiscal year. Everyone’s favorite toy company (Hasbro, in case you wonder) will release their final results for Q4/2022 next week, but we already know their disastrous preliminary numbers (Mattel fared much better in 2022 btw). So how did Disney do? Well, kind of ok-ish, but not everything is roses, unicorns and butterflies in the Magic Kingdom. Click through for more!

First some basic numbers, revenue in the quarter is up by 8% compared to fiscal Q1 from a year before: $23.5 billion.  This beats expectations by analysts. Earnings per share are 99 cents, which also beats expectations, but is somewhat lower than one year before. Total segment operating income is a little more than $3 billion, which is 7% less than a year before.

Disney’s theme parks are doing pretty well again post pandemic. Revenue is up by 21% to now 8.7 billion and it’s the only profitable segment at the moment.

But let’s focus on Disney+. And the streaming service continues to burn money. Operating loss here was $1.1 billion, somewhat less than in the previous quarter, when it was $1.5 billion, but that’s still a lot of money. And losses are up by 78% when compared to fiscal Q1 2022 when it was “just” 593 million.

Disney also had to report their first ever quarterly subscriber loss for Disney+. But before you hasten to type certain comments down below it’s important to look at the details here.

Yes, Disney+ lost 2.4 million subscribers between October 1st and December 31st, but they lost the subscribers in India, where the local version of Disney+, Hotstar, no longer has the rights to the Cricket league (a big thing in India). In North America the subscriber numbers are stagnating though, so it’s not all sunshine here either, Disney+ only added 200,000 subscribers in the US and Canada, the service now has 46.6 million subscribers in the region. This comes after a price increase for Disney+ in 2022. Outside of the US and Canada, excluding India, Disney now has 57.7 million subscribers, 1.1 million more than in the previous quarter.
Total number of subscribers worldwide has declined from 164.2 to 161.8 million. But again, all of that is due to the loss of Cricket rights in India, where people pay very little for Disney+/Hotstar to begin with. Disney did not meet analyst expectations with its subscriber numbers for Disney+ and underperformed.

The stalling subscriber numbers in North America are a reason for some concern. Netlix is greatly outpacing Disney here. Netflix currently has 74.3 million subscribers in the US and Canada, to provide some context here. That’s almost 37 million more than Disney+. And they added 7.6 million subscribers worldwide in Q4/2022, compared to Disney’s loss of 2.4 million subscribers. Netflix now has 230.7 million worldwide subscribers compared to Disney’s 161.8 million.

Even more concerning for Disney: average monthly revenue per subscriber in the US and Canada decreased from $6.10 to $5.95 – despite higher subscription fees. And it’s no better abroad, where average revenue also declined, it’s now $5.62 compared to $5.83 previously, Disney explains that with unfavorable exchange rates. Only in India average revenue went up, from a whopping $0.58 to $.074, as mentioned before Disney+/Hotstar in India is very, very cheap and makes very little money for the company.

So not only is subscriber growth stalling, Disney makes less money per subscriber than before, despite higher subcsription fees, excluding India here where people pay very, very little.

Bob Iger also announced several things: the company will be restructured (again), Linear networks and ESPN will be their own segment now. He also said that the decision on what content to make and how to release it will be returned to the individual studios, back to the creatives. Make of that what you will.

And then there are of course all new cost cutting measures that were announced as a reaction to the results. Because of the ongoing horrendous losses in Disney’s direct to consumer business (i.e. streaming losses), Iger announced that Disney wants to cut costs by $5.5 billion. And as usual some of the cost cutting will be achieved through layoffs. Disney will layoff 7,000 people. As usual Wall Street honored these announcements with higher stock prices after the announcement. At least investors seem to be happy about all that. Good for them! Bad for the people who will soon be out of a job.

I will spare you Bob Iger’s corporate bingo statements here. So that’s it.

All in all Disney is doing pretty well with their theme parks, whereas the entertainment branch of the company is not doing all that great, despite increased revenue from movies. Streaming is still a massive sink hole, of course it is to be expected in the early years, you have to build up your library first, but stalled subscriber growth in the US and Canada is certainly cause for concern and burning away 1.5 billion in Q3/2022 and 1.1 billion in Q4/2022 (Disney’s first quarter of their fiscal year) is something you can’t sustain forever. Eventually shareholders will get restless. In fact, there is an ongoing dispute between Disney and one very prominent investor (he owns $990 million worth of Disney stocks) who wants a seat on the board and who demands changes in company policy. Said investor, 80-year-old Nelson Peltz, is no fan of Disney’s current streaming strategy.

Disney also announced that they may license some of their Disney+ content. They are currently “exploring” the option. It may very well be that Disney+ exclusivity will no longer be a thing for some movies and shows in the near future. Licensing content is certainly one way to increase revenue, the question is how that will affect subscriber numbers for Disney+ when you can watch at least some of the content on rival streaming services or networks.

Are you still subscribed to Disney+? And do you actually pay for the service or did it come with your mobile plan etc?

Disney’s earnings report (PDF)

• Disney Earnings Report For Q4/2023
• Weekend Fun: Disney Edition
• Disney Earnings Report - Disney+ Subscriber Numbers In The US Are Stagnating
• The Disney And Hasbro Earnings Reports
• Bob Iger's Contract At Disney Extended Through 2026
• Disclosure Policy