Disney is winning the streaming war, but it’s paying a high price for new movies like “Doctor Strange” and “Black Panther.”
The content king begins the second century, beating Netflix in subscriber growth. Kalkine Group CEO Kunal Sawhney told the International Business Times, “Walt Disney’s second-quarter fiscal year reported tremendous growth in subscribers as the streaming service continues to drive new viewership.”
“Wednesday’s results came as a surprise to analysts, especially after Netflix’s fall from probation. Disney’s biggest competitor, Netflix, reported losing about 200,000 subscribers last month and its stock plummeted.”
However, Netflix’s victory over the streaming giant came at a cost, deteriorating the company’s Q2 earnings. Diluted earnings per share from continuing operations fell below analyst estimates to $0.26 from $0.50 in the prior quarter.
Wall Street didn’t like what they saw as they lowered the company’s stock in a pre-market deal.
However, management was pleased with the results, highlighting the growth of subscribers to the Disney+ service and providing an optimistic outlook for the company’s second century.
“Including fantastic performance in our national parks and continued growth of our streaming service, we added 7.9 million Disney+ subscribers in the quarter and our strong growth in Q2, including total subscriptions to all DTC services in excess of 205 million The results have proven once again, we are in our own league,” said Bob Chapek, CEO of The Walt Disney Company. in the shareholder report.
“As we look forward to the second century of Disney, we are confident that by combining amazing storytelling with innovative technology, we will continue to transform entertainment by creating a bigger, more connected and magical Disney world for families and fans around the world.”
The problem behind Disney’s sluggish Q2 earnings is rising production costs along with lost licensing costs. “Disney revenue and revenue fell short of Wall Street analysts’ expectations due to high TV and movie content costs and a $1 billion loss in licensing costs, focusing on Disney+, Hulu and ESPN’s own streaming services,” said Michael. Ashley Schulman, CFA, Chief Investment Officer and Partner at Running Point Capital Advisors, told IBT.
“Overall, Mickey Mouse has performed relatively well in resorts, theme parks and streaming service subscriber growth and has a promising movie pipeline, but investors are questioning the sustainability of subscriber growth and Disney’s ability to dominate TV and movie costs. Expected to be $32 billion, their ability to generate revenue within the streaming service doubles to $900 million the size of Dumbo, which doubles the loss.”
Meanwhile, Schulman points to several more factors that negatively impact the company’s bottom line, such as the sales hit from theme park closures in Hong Kong and China. Then the state of Florida decided to dismantle the Reedy Creek Improvement District, home to the company’s Disney World Resort.
Beyond these challenges, Schulman is optimistic about Disney’s future, both in streaming services and in the traditional theater business.
“Also, the Disney+ streaming service has grown by nearly 8 million subscribers compared to Netflix’s recent downturn, and will expand to an additional 50 countries by 2022,” he says. “Also, Disney’s theaters, including ‘Lightyear’, based on the ‘Avatar’ sequel Buzz Lightyear, and the new MARVELous films ‘Doctor Strange in the Multiverse of Madness’, ‘Black Panther’ and ‘Thor: Love and Thunder’ ‘The release pipeline looks promising, but has lost its light without promises of a Chinese theatrical release.”
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