[Asia Economy Reporter Jeong Hyunjin] Disney saw a significant increase in streaming subscribers between July and October this year, but due to concerns over an economic recession and the impact of streaming TV-related costs, advertising revenue declined, resulting in earnings that fell short of market expectations. Following the disappointing earnings report, Disney's stock price plunged nearly 10% in after-hours trading.
According to CNBC and other outlets on the 8th (local time), Disney announced its fiscal 2022 Q4 (July 3?October 1) results, reporting revenue of $20.15 billion (approximately 27.85 trillion KRW), up 9% year-over-year, and earnings per share (EPS) of $0.30, down 19%. Both revenue and EPS fell short of market expectations ($21.24 billion and $0.55, respectively).
However, Disney achieved strong performance in its streaming business. During this period, Disney+ added 12.1 million subscribers, and including this, the total number of subscribers across all Disney streaming services increased by 14.6 million. As a result, Disney+ reached a total of 164.2 million subscribers, and the entire Disney streaming business reached 236 million subscribers. The market had expected Disney+ to have 160.45 million subscribers.
As a 'latecomer,' Disney+ is rapidly closing the gap with streaming industry leader Netflix. The subscriber gap between Netflix and Disney+ was 149.4 million in March 2020 but had shrunk to 58.9 million as of September this year, more than halving.
Despite the rapid growth in the streaming business, Disney's earnings fell short of market expectations due to increased costs and decreased advertising revenue. Although the number of streaming subscribers grew significantly more than expected, profitability deteriorated, with the segment recording a loss of $1.47 billion during this period. According to The Wall Street Journal (WSJ), this loss more than doubled compared to the same period last year and exceeded market expectations by 38%.
Revenue from the media and entertainment segment, which includes advertising revenue, decreased by 3% year-over-year to $12.7 billion, significantly below the market expectation of $13.9 billion. Revenue from the parks, experiences, and products segment increased by 34% to $7.4 billion. The market had anticipated this segment's revenue to reach $7.5 billion.
Bob Chapek, Disney's Chief Executive Officer (CEO), reiterated his previous statement that Disney+ will turn profitable in fiscal 2024 and said the company will continue to reduce losses. He mentioned that starting from November 8, Disney+ will offer an ad-supported service priced at $8 per month, while the ad-free service price will be raised by 38% to $11 per month. He added that with cost restructuring, Disney expects to achieve profitability targets by September 2024.
Following the earnings announcement after market close, Disney's stock price plunged nearly 10% in after-hours trading.
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