Disney shares fall as streaming costs drag down profits

First modification: 09/11/2022 – 02:57Last modification: 09/11/2022 – 03:05

Walt Disney Co missed Wall Street earnings forecasts as the entertainment giant racked up more losses on its streaming push, sending its shares down 9%.

Although the company attracted more streaming customers than analysts expected between July and September, investors are more focused on earnings than subscription figures.

Disney spent millions of dollars to generate valuable content and compete with Netflix, HBO, among others. Its flagship service, Disney+, recorded 164.2 million subscribers in the fiscal fourth quarter, beating Factset estimates of 161 million. The area of ​​’streaming’ lost 1,500 million dollars during the period.

Paolo Pescatore, an analyst at PP Foresight, says that “the path is similar to that of Netflix”. “Expect more bumps ahead and more losses in the streaming business as there is no silver bullet for profitability.”

Paramount Global slumped after its third-quarter results showed growth at its Paramount+ streaming service, but revenue fell short of analyst forecasts.

Warner Bros Discovery Inc’s HBO Max service was buoyed by the success of the “House of the Dragon” series, but its shares fell as it grappled with restructuring costs and falling advertising revenue.

Disney hopes to come back by 2024

Disney’s net income from continuing operations increased 1% to $162 million in the quarter. Excluding some items, Disney earned 30 cents a share, below Wall Street’s target of 55 cents a share.

Revenue of $20.15 billion fell short of the consensus estimate of $21.25 billion. Disney shares fell nearly 9% to $91.35 during the day.

Disney accumulates 235 million subscriptions in the streaming services Disney +, Hulu and ESPN +, which represents an increase of 14.6 million compared to the previous quarter. Hulu recorded 47.2 million subscribers and ESPN+ 24.3 million.

“We expect our DTC operating losses to narrow going forward and Disney+ to continue to achieve profitability in fiscal 2024,” said CEO Robert Chapek. “Assuming we don’t see a significant change in the economic climate,” he added.

The ad-supported version of the Disney+ service will launch in the United States on December 8, providing a new source of revenue to defray the millions the company spends creating original movies and series for the services.

with Reuters