Although the Walt Disney Company reported increased revenue profitability during yesterday’s Q1 Earnings Call, CEO Bob Iger also revealed that Disney+ lost about 2.4 million subscribers in the last three months of 2022.
The Q1 Earnings Call was the Company’s first since the return of former CEO Bob Iger to power following a disastrous Q4 at the end of last year, which resulted in the removal of CEO Bob Chapek from the position. Understandably, there was immense pressure for success, especially since Disney has struggled within its theme park and streaming sectors since 2020, along with a poor theatrical run for its 61st animated film Strange World (2022).
During the call, company officials revealed a 35% increase in profit for the Disney Parks & Resorts division since last year, amounting to $2.1 billion in profit. Additionally, Direct-to-Consumer quarterly revenue increased 13%, resulting in a $5.3 billion growth despite the net loss of over two million Disney+ subscriptions, which Variety reports is the service’s first-ever decline since Disney launched its streaming platform four years ago.
However, a 78% higher operating loss for the DTC division offset this profit by $1.05 billion, which apparently resulted from higher costs for Disney+ technology and programming and lower ad revenue for Disney-owned Hulu. Moreover, US subscribers did not respond well to an ad-free Disney+ plan increase from $7.99 to $10.99 monthly in the fiscal year 2022, when Disney+ reported a loss of $1.5 billion.
As a result, the Company sees this marginal reduction in operating losses as less consequential, with CFO Christine McCarthy saying she was “pleased” with the initial rollout of the ad-supported Disney+ tier, expected to produce “meaningful financial impact” later this fiscal year. Plus, Iger noted during the meeting: “we only suffered a de minimis loss of subs… that tells us something,” with a projected expectation for Disney+ to hit profitability by 2024.
Furthermore, Disney reportedly attributes the drop in overall subscribers to its loss of streaming rights for Indian Premier League cricket matches, leading to a 3.8 million sequential decline of the Southeast Asian version of Disney+, Hotstar, with the Disney CEO asserting that streaming is “the future.”
In addition, Bob Iger made the following statement:
After a solid first quarter, we are embarking on a significant transformation, one that will maximize the potential of our world-class creative teams and our unparalleled brands and franchises. We believe the work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges and deliver value for our shareholders.
Certainly, with a posted total revenue of $23.51 billion for the Walt Disney Company overall, Disney will consider Q1 profits a huge financial success, despite fluctuating popularity of its streaming services amid content controversy.