Disney+ has reached 103.6 million global paid subscribers, short of industry expectations of 110 million subscribers at this point.
While the fallout from the pandemic leads to a tough comparison with a year ago, The Walt Disney Co. delivered mixed results in its earnings Thursday, delivering revenue of $15.6 billion and an adjusted earnings per share of 79 cents.
Wall Street consensus had been for $15.93 billion in revenue, and an adjusted EPS of 27 cents.
Much of the the company’s growth continues to come from the streaming service Disney+, which now has 103.6 million subscribers, the company says. That is below the Wall Street consensus of 110 million subscribers.
Still, Disney’s direct-to-consumer business delivered revenue of $4 billion, up 59 percent from the same quarter a year ago. Disney’s linear networks unit, which includes ESPN and ABC, was down 4 percent from a year ago at $6.7 billion, while its theme parks and experiences division continues to face the toughest headwinds, down 44 percent to $3.2 billion.
The company also disclosed that it expects to spend about $1 billion this year on enhanced safety measures and regulatory issues associated with the COVID-19 pandemic. It also faced a $1.2 billion impact in the parks unit compared with a year ago, with less of an impact at its media businesses.
At the same time, the company is poised to see more growth in its legacy businesses, as it returns to theaters in a significant way with Black Widow and Jungle Cruise in July, and Shang Chi in September, and with its U.S. theme parks set to fully reopen (albeit not at full capacity) over the summer. Disney CEO Bob Chapek said on the company’s earnings call Thursday that Shang Chi and Free Guy would open only in theaters, with a 45-day window before thy hit streaming.
The company’s revenue was still down 13 percent year-over-year, with the first couple of months of 2020 being relatively normal (outside of China) until much of the world shut down in March. With parks and theaters open and streaming continuing to boom, the third quarter could mark a return to growth for the company, led by Chapek.
“We’re pleased to see more encouraging signs of recovery across our businesses, and we remain focused on ramping up our operations while also fueling long-term growth for the company,” said Chapek in a statement. “This is clearly reflected in the reopening of our theme parks and resorts, increased production at our studios, the continued success of our streaming services, and the expansion of our unrivaled portfolio of multiyear sports rights deals for ESPN and ESPN+.”
At the parks business, Chapek said that the company has been increasing capacity at Walt Disney World in Florida and is in the process of rethinking its vision for a loyalty program at Disneyland, with the company’s annual pass discontinued amid the pandemic. It “gives us a chance to make a modern version of a park loyalty program, an affinity program, that isn’t governed by legacy,” Chapek said.
In the streaming sector, Disney+ also saw its average revenue per user (ARPU) fall to $3.99, compared to $5.63 a year ago. The company said this was because of Disney’s Hotstar service in Asia.
Despite missing expectations, Chapek said that “as full production levels resume, the increased output will help fuel additional sub growth” at Disney+.
ESPN+, meanwhile, grew subscribers by 75 percent year-over-year to 13.8 million, thanks to its enhanced lineup of live sports, including UFC fights. ESPN+ ARPU also rose by 7 percent to $4.55, also thanks to UFC. Hulu, meanwhile, saw its subscriber base grow by 30 percent year-over-year, split between its SVOD service (37.8 million subscribers) and its live TV service (3.8 million subscribers). ARPU for Hulu’s SVOD service was flat, with ARP of its live TV service up 21 percent as a result of higher pricing.
Chapek also announced two new rights deals on the earnings call: An expanded deal with Major League Baseball running through 2028, and a deal with LaLiga. Both include full rights for ESPN+. “While our overall strategy is still very supportive of our linear business, with every deal we make, we are considering both the linear and DTC components,” Chapek said.
Elsewhere in the sports space, Chapek said the company is “in conversations” with the NFL over the Sunday Ticket out-of-market games package, currently owned by DirecTV. However, he added that Disney would only do the deal if it thought it could make it a profitable endeavor for the company.
