Disney swings to $460m loss as subscribers continue to decline

 

The Walt Disney Company lost money in its fiscal third quarter, owing to a drop in subscribers and impairment costs.

In the three months ended July 1, the corporation had a net loss of $460 million, compared to a net profit of $1.4 billion in the same quarter previous year.

In the previous three months, Disney reported 146.1 million Disney+ members, a 7.4 percent quarterly loss. According to Street Account, it fell short of the 151.1 million projected. The business saw a 24% drop in Disney+ Hotstar customers after failing to extend the rights to Indian Premier League cricket events.

In the preceding quarter, Disney booked a $2.65 billion one-time restructuring and impairment charge. A significant portion of this fee was due to the removal of material from its streaming services and the termination of third-party contracts.

Revenue increased by 4% year on year to $22.3 billion in the third quarter, virtually matching a Refinitiv projection of $22.5 billion.

Shares of the firm dipped by roughly 1% after market close, but rose more than 2% in after-hours trading when CEO Bob Iger stated Disney's reorganization and cost-cutting efforts are on track.

"Our results this quarter reflect what we have accomplished through the unprecedented transformation we are undergoing at Disney to restructure the company, improve efficiencies, and restore creativity to the centre of our business," stated Mr. Iger.

"These significant changes are resulting in a more cost-effective, coordinated, and streamlined approach to our operations, putting us on track to exceed our initial savings goal of $5.5 billion while also increasing our direct-to-consumer operating income by roughly $1 billion in just three quarters."

In February, Disney announced 7,000 job cuts as part of a "significant transformation" outlined by Mr. Iger. The job cuts were part of a $5.5 billion savings plan for the corporation.

Mr. Iger returned as CEO in November, following a difficult two-year term by his handpicked replacement, Bob Chapek.

He previously worked at Disney for more than four decades, including 15 years as CEO from 2005 to 2020, managing the company's purchases of Pixar, Marvel, 21st Century Fox, and Lucasfilm, which controlled the Star Wars brand.

In the most recent quarter, the company's parks, experiences, and goods division recorded a 13% growth in sales to $8.3 billion.

Its income from overseas channels fell 20% to $1.2 billion in the most recent quarter. The decline was linked to decreasing advertising income and, to a lesser extent, an unfavorable foreign currency effect, according to the firm.

Domestic channel revenue fell 4% to $5.5 billion in the third quarter, while operating income fell 14% to $1.8 billion.

"Disney had a startlingly bad quarter, with a significant shortfall in subscriber growth... According to Jesse Cohen, senior analyst at Investing.com, Disney would have to lower its pricing from present levels in order to boost demand and defend its market dominance.

"The streaming space is certainly feeling the pinch of persistently high inflation, which has forced consumers to make changes to their spending habits as disposable income shrinks."

Disney reported a fall in income from equity investees to $196 million from $228 million, owing to a decrease in advertising revenue. However, direct-to-consumer sales climbed by 9% to $5.5 billion for the quarter.

"I believe our film studios, parks business, and streaming will drive the most growth and value creation over the next five years," Mr Iger said on the conference call.

"Some of our recent films have obviously under-performed, and we don't take that lightly... We are working hard to improve the quality of the films we have in the works."

"Disney must be wary of adopting old principles and practises that allowed it to reach its peak previously, as they may no longer be fit for the future," said Matt Bradley, managing director UK South at consultant Sullivan & Stanley.

"The emphasis should continue to be on leveraging [Mr] Iger's expertise while not stifling progress."

"Disney must also ensure that it has a transformation strategy that focuses on constant improvement - it's important to look inward and reassess every element of the company's structure and operational strategy for enduring success."