Disney revenue slid 13% in the fiscal second quarter, the company reported Thursday, but earnings per share nearly doubled, beating Wall Street expectations.
Streaming once again was the main highlight of the financial report, but growth of Disney+ moderated significantly during the period. It reached 103.6 million global subscribers, up from 94 million as of the previous quarter. Analysts had expected a tally of around 109 million, with the miss causing the company’s shares to tumble in after-hours trading.
Revenue in the quarter, which ended April 3, totaled $15.6 billion and undershot the consensus forecast from analysts, who had been looking for $15.87 billion. The Parks, Experiences and Products unit was the culprit, with revenue plunging 44%. The company estimated a $1.2 billion hit to the parks division in the quarter due to Covid-19 and said it will spend about $1 billion in fiscal 2021 to address government regulations and implement safety measures for employees, talent and visitors.
Diluted earnings per share of 50 cents came in well above the Street, though, which had predicted 27 cents, and also almost doubled from the 26 cents reported in the year-earlier quarter.
The profit marked a return to positive numbers after two straight quarters of losses. Investors haven’t flinched as red ink filled the balance sheet. They boosted the stock to record levels toward the end of 2020, though in recent months it has been locked in a narrow range
During its annual shareholder meeting in March, the company announced that Disney+ had surpassed 100 million subscribers a about 16 months after its launch. That exceeded the five-year projections made by the company in 2019, and bar has been reset to 230 million-260 million subscribers globally by 2024. One indication of the value of reaching scale quickly came earlier this year when Disney raised the monthly price of a subscription to Disney+ by a dollar to $8.
Pricing was tricky with respect to Hulu, however. The Hulu + Live TV bundle reported 3.8 million subscribers, its second straight quarter of decline. The average monthly revenue per paid subscriber for Hulu’s live bundle, though, increased from $67.75 to $81.83. ARPU for Disney+ slipped to $3.99, a downturn the company blamed on the launch of Disney+ Hotstar, which features Disney as a lower-cost add-on option for subscribers in India and other territories.
Including Hulu + Live TV, total Hulu subscriptions rose 30% to 41.6 million.
One key ingredient that has been added to the streaming mix is Marvel. The superhero division has contributed two series this year, with a third, Loki, coming in June. WandaVision earned favorable critical notices after premiering in January and also stirred up significant fan interest.
On the movie side, Raya and the Last Dragon opened in March both theatrically and as a Premier Access title on Disney+. It has grossed $44 million in the U.S. to date, a fraction of the animated norm. The Premier Access pattern, first tried last summer with the live-action remake of Mulan, charges subscribers an additional $30 fee to watch new movies.
Disney has not offered even directional commentary about how meaningful a driver the day-and-date release scheme is for revenue or streaming subscription growth or retention. But it is clearly seen as having value. Cruella, a spinoff of 101 Dalmations starring Emma Stone, and Marvel entry Black Widow, will be Premier Access releases in the coming weeks.
Theme parks have been hit hard by Covid-19 but their comeback is under way, even if it is expected to take several years. Disneyland finally swung its gates back open for a limited number of visitors in April, making Disneyland Paris the one park in the portfolio that remains closed. The European site managed to reopen in the middle months of 2020 before Covid infection rates and travel restrictions forced it to close again indefinitely. It has pushed two planned reopening dates and Disney has said only that it remains “optimistic” that it can reopen soon.
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