Disney’s streaming spending weighs on profits

Walt Disney’s streaming business added a strong 14.6 million subscribers in the fourth quarter, but the growth came at a premium, as significant losses weighed on the company’s bottom line.

The streaming The service’s operating loss grew by $800 million to $1.5 billion largely due to content spending and sales marketing expenses. As a result, operating income at Disney’s entertainment and media group fell 91% to $83 million in the quarter.

Disney Tuesday reported earnings of 30 cents per share, well below the Wall Street consensus of 54 cents. Overall, revenue grew 9% to $20 billion. Net income was $162 million, up 1% from a year earlier.

Shares fell nearly 7% in after-hours trading. Disney shares are down 36% this year.

The grow up healthy Disney’s streaming subscriptions, which include Disney Plus, Hulu and ESPN Plus, brought the total number of subscribers to 235.7 million – more than the 227 million Netflix is ​​expected to have by the end of the year. this year.

Disney CEO Bob Chapek defended the spending strategy, saying Disney Plus’ rapid growth was “a direct result of our strategic decision to invest heavily in creating incredible content and international service.”

He added that online losses will start to “narrow,” with Disney Plus expected to post its first profit in 2024, hampering a “meaningful change” in the economy.

Disney will raise the price of its streaming services and introduce a new tier of ad support for Disney Plus next month – steps Chapek said will lead to a “profitable streaming business”. “. Netflix, which has been experiencing a period of slowing subscriber growth, launched an ad-supported service last week.

Christine McCarthy, Disney’s chief financial officer, said “peak losses are now behind us” related to streaming, noting that price increases and ad-supported services will begin financial effect early next year. She added that spending on content and other expenses will slow in 2023.

Disney theme parks continued to recover from the coronavirus pandemic during the quarter. Operating income at theme parks more than doubled to $1.5 billion and revenue rose 36% to $7.4 billion despite the impact of Hurricane Ian.

McCarthy said the company’s US theme parks division suffered $65 million in damage from the hurricane that hit Florida in late September and temporarily closed Walt Disney World.

McCarthy added that Disney parks in the United States have made more money than they did before the pandemic, with per capita spending nearly 40% higher than in 2019. The parks are also experiencing a international arrivals are close to pre-pandemic levels.

But she said Disney’s park in Shanghai, China has been closed and the company “has no visibility on reopening date”.

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