The great streaming slowdown of 2022 hasn't hit Mickey Mouse yet.
Walt Disney Co. on Wednesday reported better than expected subscriber growth from its marquee streaming service Disney+ as it charged forward with its direct-to-consumer transformation, while increasing revenue from its crucial theme parks business.
The Burbank entertainment giant said Disney+ added nearly 8 million subscribers during the second quarter, exceeding analyst estimates. Wall Street had expected Disney+ to gain about 5.2 million paying members, according to FactSet. The service now has 137.7 million subscribers.
Disney's latest report comes amid growing worries among investors and Hollywood executives that the streaming business may not be as big or lucrative as once thought.
Disney Chief Executive Bob Chapek has made it his mission to grow Disney+, along with the company's other streamers Hulu and ESPN+, to astronomical heights in order to keep the company relevant to modern viewers who are abandoning the cable bundle.
Entertainment companies, including Disney, have spent billions of dollars to start and expand streaming services that would compete with Netflix as the Los Gatos giant upended the business. Early in the pandemic, subscriber counts soared and share prices followed as housebound consumers signed up for at-home entertainment options.
But the pandemic effect eventually waned. Netflix recently reported that it lost subscribers for the first time in a decade. The company's membership count declined by 200,000, prompting executives to blame competition, rampant password sharing and the company's pause in Russia. Netflix promised to rein in spending. Multiple jobs have been cut in marketing. Netflix's shares are down more than 70% so far this year.
Disney's shares have also taken a hit amid broad stock market declines, despite the remarkable resurgence of the company's parks and the return of theatrical movies at the box office. The stock has slid more than 30% since January.
The company promised Wall Street that Disney+ will reach 230 million to 260 million subscribers by 2024. Some analysts have questioned whether that goal is realistic.
So far, though, growth has continued for Disney+. Additionally, ESPN+ added 1 million subscribers to bring its total to a 22.3 million. Hulu, though, grew by just 300,000 subscribers to hit 45.6 million.
The quarterly financial results were mixed. Sales and profits missed analyst projections, though revenue increased significantly from a year ago.
Revenue was $19.2 billion during the quarter, up 23% from the same period a year ago. Disney cited a $1-billion reduction of revenues because of money owned to a customer to terminate licensing agreements for films and TV content to use for its streaming services. Disney did not name the customer.
Analysts polled by FactSet on average had expected sales of $20 billion. Disney reported adjusted earnings per share of $1.08, missing estimates of $1.19 a share.