Disney reported earnings ending 4/1/2023 yesterday after market close. EPS was $0.93 vs. $0.93 expected. Revenue was $21.82B vs. $21.78B expected. Total streaming subscribers was 157.8M vs. 163.17M expected. (Disney had 161.8M subscribers at the end of Q4 2022.) DIS 0.00 stock tanked 8% in today’s trading session.
The subscriber drop can be fully attributed to the Disney + Hotstar subscription, which went from 57.5M subscribers in Q4 2022 to 52.9M subscribers in Q1 2023. AFAIK, Disney + Hotstar is the streaming platform in India and Disney lost subscribers because Disney lost the broadcasting contract for the popular IPL cricket league. (Indian people really love their cricket games!!!) Overall, Disney’s streaming lost less money but its cable network also made less money due to less advertising revenue and higher production cost. Disney parks’ performance continues to shine with revenue up 17% YoY and operating income up 23% YoY. Overall, the segment operating income decreased 11% YoY but free cash flow is up 100+% due to decreased spending on streaming.
In the earnings release, CEO Bob Iger made the following statement:
We’re pleased with our accomplishments this quarter, including the improved financial performance of our streaming business, which reflect the strategic changes we’ve been making throughout the company to realign Disney for sustained growth and success. From movies to television, to sports, news, and our theme parks, we continue to deliver for consumers, while establishing a more efficient, coordinated, and streamlined approach to our operations.
The era of streaming land grab is officially over. Disney and Netflix are both cutting their production budgets and becoming fiscally responsible. As a shareholder, I hope Disney can start paying dividends at some point. The generative AI tools shall help Disney produce content a lot more efficiently while retaining the Disney Magic. AI is becoming more intelligent but it (so far) lacks spirituality. Let’s see if Disney can make the best of both worlds and churn out great content with much lower costs.