Q2 Earnings Announcement
Net Loss Significantly Reduced
Profitability Protected Through Price Increases
Walt Disney, which is undergoing high-intensity restructuring, has succeeded in significantly reducing its deficit through cost-cutting measures. However, the stock price has returned to the level of three years ago amid disappointment over the loss of growth momentum, such as a continued decline in subscribers in its core business, the online streaming service (OTT) sector.
On the 9th (local time), Walt Disney announced in its earnings report that its Q2 revenue this year reached $22.3 billion, up 3.8% from the same period last year. This was in line with market expectations ($22.5 billion). Operating profit was also $3.6 billion, exceeding the market consensus of $3.3 billion compiled by financial information firm FactSet. Net loss was $460 million, significantly reduced from $1.41 billion in the same period last year.
Losses in the core OTT segment were $512 million, a sharp decrease from $1.06 billion in the same period last year. This exceeded market expectations of a $758 million loss. Regarding this, The Wall Street Journal (WSJ) evaluated it as "a sign that the cost-cutting strategy implemented by CEO Bob Iger, who has returned as Walt Disney's savior, is beginning to take effect."
As losses in the OTT business segment accumulated, Walt Disney has been conducting high-intensity restructuring by reducing content production and cutting staff. Since early this year, it has been proceeding with layoffs targeting about 7,000 employees and decided to cut the content budget by $5.5 billion to reduce costs.
Disney+’s global subscriber count was 146.1 million, down 7.4% from 157.8 million in the previous quarter. Losing the broadcasting rights to the 'Cricket League,' the most popular sports league in India, significantly impacted the subscriber decline. In its home market of North America, subscribers also slightly dropped to 46 million from 46.3 million in the previous quarter.
To offset the subscriber decline and losses, Disney+ decided to raise its prices. After the earnings announcement, Disney+ stated that from October 12, the price of its ad-free premium plan will increase from $11 to $14. Hulu also set its ad-free plan price 20% higher than before, at $18.
Bloomberg reported, "Disney+’s price hike is a move to protect profitability," explaining that "it is the same strategy as existing OTT services trying to offset subscriber losses and deficits through price increases." This is the second time Disney+ has raised its plan prices this year. As a latecomer in the OTT market, Disney+’s premium plan price remains lower compared to competitors like Netflix ($15.50) and Warner Bros. Discovery’s Max ($16).
Although the earnings themselves did not significantly deviate from Wall Street expectations, the stock price is falling due to disappointment over the failure to defend subscriber numbers in the OTT segment. Walt Disney’s stock, listed on the New York Stock Exchange, closed the regular session down 0.73% at $87.49. After the earnings announcement, it extended its decline in after-hours trading, falling by over 1% as of 5:23 a.m. Korean time.
The stock price, which fell below the $100 mark earlier this year, has plunged to the level of three years ago amid increasing losses. Compared to the peak of over $200 reached intraday in March 2021 during the COVID-19 pandemic boom, it is less than half that level.
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