Shares of The Walt Disney Company (NYSE: DIS) are trading higher this week after the media and entertainment company reported earnings.
How Did Disney Perform in Q2?
The company said that Disney+ subscriptions increased to 152.1 million for the third quarter, exceeding the 147 million analysts’ expectations, sending its shares up 6% after the closing bell. This was the first time in history that Disney surpassed Netflix in subscription numbers as it recorded 221 million subscriptions to Netflix’s 220.7 million.
Disney has been able to attract more and more customers mostly because of its diverse library which consists of Marvel movies streaming on Disney+, sports events on ESPN+, and various cable TV shows available on Hulu.
Despite a recent surge in subscriptions, Disney reduced its projection for Disney+ subscribers in 2024 from 245 million to 215 million. But the company stays positive that Disney+ would turn a profit by the conclusion of its fiscal year in 2024.
The Q2 report shows adjusted earnings of $1.09 per share, managing to beat the consensus estimate of $0.96, according to Refinitiv. The revenue for the second quarter comes in at $21.5 billion topping the. $20.96 billion expectation.
In recent weeks, there has been a great deal of change in the streaming industry, as some claim that the worldwide streaming market is about to become saturated.
Netflix’s subscription base took another hit recently, but the streaming platform expects subscriber growth to go up again. Disney’s other rivals like Warner Bros. Discovery revealed changes to their programming strategies in their attempt to deal with the current uncertainty in the streaming space.
Disney has also been struggling lately, reporting that Disney+, Hulu, and ESPN+ together lost $1.1 billion during the third quarter of the fiscal year, caused by the services’ higher content costs. During the same quarter, Disney’s average revenue per user for Disney+ fell by 5% in the U.S. and Canada.
Disney will also be making changes of their own with a new price structure that includes an advertising-supported Disney+.
The streaming service with advertisements will cost $7.99 per month beginning on December 8 in the US, which is the same as Disney+ without ads. Disney+ will cost $3 more per month, or $10.99.
Parks Impress Once Again on Strong Demand
Disney’s parks, experiences, and products division reported increases in attendance, rented rooms, and cruise ship sailings, which led to a 72% increase in revenue for the quarter. The company will record $7.4 billion in revenue from these departments, compared to $4.3 billion for the same period last year.
According to CEO Bob Chapek, the company has been able to boost capacity at its parks by bringing back in-park activities like character meet-and-greets, theatrical shows, and evening events at Disneyland.
Additionally, brand-new technological innovations like Genie+ and Lightning Lane products increased average per-person ticket sales during the quarter. According to the firm, per-person expenditure at domestic parks climbed by 10% in Q2 compared to the same quarter in 2018 and is more than 40% higher than fiscal 2019.
This led Disney to implement a new online reservation system to manage crowds post Covid-19 pandemic restrictions.
“As it relates to demand, we have not yet seen demand abate at all and we still have many days when people cannot get reservations,” Christine McCarthy, Disney’s CFO, said in the company’s earnings call. “So, we’re still seeing demand in excess of the reservations that we are making available for our guests.”
McCarthy did however point out that foreign visitors to American parks have been slow to come back. These park visitors typically make up 17% to 20% of all visitors.
“We expect international visitation when it’s fully back to actually be additive to margins, because those guests tend to stay longer at the parks and they spend more money when they’re there, as well,” she concluded.
Summary
Disney shares are trading higher this week after the company raised prices for its streaming service Disney+ and reported strong earnings on the back of the robust performance of the Parks business.
