The Disney Earnings Report

I won’t bore you with all the financial details in this article about Disney’s quarterly earnings, I will focus mostly on everyone’s favorite streaming service: Disney+. Overall Disney beat expectations, total segment operating income increased 19% to now $4.225 billion (Disney’s quarterly income is basically what Hasbro’s total annual gross revenue is). Theme parks are somewhat slowing down because of inflation, classic linear tv is still on the decline. But let’s take a look at Disney+! So click through for more!

Bob Iger’s favorite pastime

Disney was proud to report that their streaming segment returned a small profit of $47 million! Compared to the same quarter last year where they posted a loss of $512 million this is a major turnaround for the company.

But when you look at the actual details things are somewhat less rosy. It turns out ESPN is solely responsible for making the streaming segment profitable.

Disney+ and Hulu combined reported a loss of $19 million. Still a massive improvement of course, but also still not profitable. Also, Disney would not disclose how much Disney+ and Hulu on their own make, so it’s anyone’s guess how profitable Disney+ actually is.

If we look at subscriber numbers the trend here is very unimpressive.

In the US and Canada Disney+ added some 800k subscribers in the last quarter. Disney+ now has 54.8 million subscribers in the US and Canada.

Excluding India / Hotstar international subscriber numbers are stagnating, down 100k to now 63.5 million subscribers. Hotstar shedded another 500k subscribers in India. So while the official PR release talks about 1% growth for Disney+ core, all of that very modest growth comes from the US, outside the US subscriber numbers are either stagnating or declining.

In comparison Netflix added a whopping 8 million new subscribers in the time Disney added 800k subscriptions in North America (excluding Mexico) and lost 600k in foreign markets.

An on the Nielsen Streaming Gauge, a market share analysis of streaming services, Disney is struggling to outperform tubi and is now the #6 streaming service used in North America with 2% market share. Netflix has 8.4%. In short: given the high number of subscribers Disney+ market share is pitiful. And Hulu’s market share keeps declining. So while streaming is overall becoming more important and even though Disney’s absolute numbers are growing, the other services are just growing so much more. As is perfectly illustrated by Netflix adding 8 million subscribers (worldwide) compared to Disney’s 700k, excluding India, and 200k if we include all territories.

Even worse: the average revenue per customer in the US/Canada has decreased from $8 in the last quarter to $7.74.

So it comes as no surprise that earlier this week Iger announced various things: a price hike this fall and a crackdown on password sharing like Netflix did a while ago. Netflix’ password sharing crackdown was a huge success story for Netflix. It did now draw massive ire from former freeloaders, instead these people did not want to miss out on Netflix and got a subscription. Iger apparently hopes the same will apply to people who get Disney+ for free at the moment because a friend or family member shares their password.

In my opinion Iger is overlooking something though: Netflix has actual compelling content. And not just Star Wars or Marvel as the only noteworthy exclusive things either, but something for everyone… every week.

So yes, while Disney has stopped hemorraghing money with their streaming services it comes at a price. Content production for Disney+ has slowed to a snail’s pace. The two new upcoming Marvel shows are both “old news”, as in, they were completed a while ago but held off for a later release date. On the Star Wars front we have nothing new at all in the pipeline. Andor season  2 was greenlit years ago and the show ends after this. Ahsoka will come maybe 2026, maybe 2027, no one knows. Skeleton Crew, like The Acolyte, will certainly never get more than one season. So what new shows or content has Disney for its streaming service? Same with Marvel. The only two shows we currently know about will both be massive flops. Agatha Harkness (if you ask “who?” you have your answer) and “Ironheart” aka Riri Williams (again, if you ask “who?” you have your answer) will both fail. And nothing actually new has been announced for Marvel on Disney+.

If Iger’s idea to stop bleeding money with Disney+ is to simply stop making exclusive content it will certainly achieve one goal: Disney will stop losing so much money. But that other goal? Growth and more market share? How can Disney+ compete with Netflix, Amazon Prime or even things like Max when these services have actual tentpole shows and Disney+ has…. things like Echo (mega flop), The Acolyte (massive flop) and more flops in the pipeline? And while Netflix makes a Beverly Hills Cop sequel Disney makes things like the disastrous Peter Pan movie for its streaming platform.

So I would not be surprised if Disney’s password crackdown will not even remotely get the same results as Netflix did. Because as of now the only reason to have Disney is the archive, all the videos you can put on loop maybe to stop kids from bothering their parents all day (this is sarcasm). Only in the US Disney doesn’t have a good reputation when it comes to content for kids among certain groups.

And as far as price hikes are concerned: Disney+ basic will be $9.99 and premium will be $15.99 beginning in October. But Disney really wants you to get one of their bundles.

The ad-supported basic Hulu and Disney+ bundle will then cost $16.99, remember, this is with commercials! The ad-free tier will still be $19.99.

A new bundle with Hulu, Disney+ and Warner’s Max will cost $16.99 for the basic tier with ads and $29.99 if you think streaming services is about NOT getting any ads.

So while Disney, as a company, is still earning a lot of money and anyone who hopes they will tumble and go down will forever be disappointed, their tentpole streaming platform Disney+ is not remotely as competitive and in great shape as Iger would like to admit. But even the theme parks now feel the effects of higher inflation with attendance stagnating and profit slowly declining by 6% to still pretty respectable $1.3 billion for the domestic parks. Netflix is forever out of reach though. Prime has more market share too. Hulu still has more market share than Disney+, but it is declining, has been declining for quite a while now. And Disney+ fights with tubi for the #5 position. Also, Disney lacks any and all compelling exclusive content these days. It has no House of the Dragon, no The Boys, no Bridgerton. It remains to be seen how many people will want to pay $10 and more per month for a service that more and more is just about the back catalogue and has no compelling exclusive content.

Another thing to add is that all streaming services are affected by a volatile customerbase, it’s become pretty common for people to sign up for a month or two to watch everything they want, only to cancel the subsciption again after that. Netflix has an effective way of combating that fickle customer behavior: they just have something new virtually every week. Disney with its four or five exclusive shows per year that theoretically may appeal to a broader audience (Marvel and Star Wars) does not have that. Here it’s enough to sign up for a month to watch all the new things… then you can wait for a year and sign up again for one month.

Disney+ has no Stranger Things, no Bridgerton, no Squid Game, Disney+ put all the money on just two things: Marvel and Star Wars. Hulu at least has The Bear, which is pretty successful and earlier this year also Shogun, which enjoyed moderate success (far removed from any of the successful Netflix shows though). In short: Disney+ simply lacks interesting exclusive content that is not Star Wars or Marvel and while it may surprise Disney not all people even want to watch Star Wars and Marvel and would rather watch something like Bridgerton. That Disney failed to create any successful content for Disney+ that is not The Mandalorian may become one of their biggest issues. Unless Iger is content with Disney+ no longer burning money and to be relegated to mostly being an archive for older movies and shows.

Following the report Disney’s stock price declined further. It’s now a little more than $85. Stock price declined by more than $5 in the past two days. Overall Disney’s stock price declined by 49% in the past three years.

And if you wonder: neither Star Wars nor Marvel were mentioned even once. Not in the report, not in the presentation, neither in the earnings call with analysts. Nothing. Silence.

The Disney Earnings Report

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