In the final quarter of 2023, Disney+ faced a significant setback with a decline of 1.3 million subscribers, directly following a substantial price increase introduced in the fall. Despite this challenge, the streaming platform managed to mitigate its streaming business losses by $300 million during the October-December period.
Core Subscriber Base Declines
The core subscribers, comprising users from the U.S., Canada, and international regions (excluding Disney+ Hotstar in India), witnessed a decrease from 112.6 million to 111.3 million. This drop was highlighted in Disney’s quarterly earnings report released on Wednesday.
Revenue Challenges and Performance
While Disney’s revenue remained relatively stable at $23.5 billion, it fell short of the anticipated $23.8 billion average estimate. The company attributed this shortfall to challenges in its TV business and the underperformance of two theatrical releases, namely “The Marvels” and “Wish.”
Outlook and Investor Relations
Despite facing revenue challenges, Disney remains optimistic, anticipating a profit increase of at least 20% for the year, translating to around $4.60 per share. This outlook surpasses the estimated $4.27 per share, bolstering CEO Bob Iger’s position amidst efforts from activist investor Trian Fund Management LP. Trian has put forth nominations for founder Nelson Peltz and former Disney finance chief Jay Rasulo to join Disney’s board.
Streaming Strategy and Future Projections
Disney’s streaming service, Disney+, saw a decline in subscribers, totaling 149.6 million, missing analysts’ projections of 151.2 million. However, the overall streaming losses, encompassing Hulu and ESPN+, decreased to $216 million from $1.05 billion a year ago. Disney aims to add up to 6 million core Disney+ subscribers in the current period, with a target to achieve profitability by the fourth quarter of the fiscal year.
International Parks Segment Growth
Despite the challenges faced in its streaming sector, Disney found success in the international parks segment. The segment witnessed profit growth over fourfold, coupled with a 35% increase in sales compared to the previous year. This growth offset more modest gains in revenue at domestic resorts, with a slight drop in profit, particularly at Walt Disney World in Florida.
Policy Changes and Password Sharing
In response to its evolving landscape, Disney+ announced forthcoming restrictions on password sharing as part of its revised Terms of Service, particularly focusing on users in the United States. The updated Service Agreement defines a household as the collection of devices associated with the subscriber’s primary personal residence, utilized by individuals residing there. Disney+ users were informed about forthcoming limitations on account sharing outside the subscriber’s household. The service will employ analysis of account usage to ensure compliance. These changes are already in effect for new subscribers in the United States and Canada, extending to Hulu, another streaming service under The Walt Disney Company. Existing members will experience the changes by March 14.
Despite the challenges posed by subscriber loss following a price increase, Disney remains optimistic about its streaming business’s profitability outlook. With strategic initiatives in place, including a focus on subscriber growth and content offerings, Disney is determined to successfully navigate the evolving landscape of the streaming industry.
