Disney’s streaming leap hooks 28.6 million subscribers, earnings beat forecasts

FAN Editor
FILE PHOTO: A man looks at his phone as he passes by a screen advertising Walt Disney's streaming service Disney+ in New York
FILE PHOTO: A man looks at his phone as he passes by a screen advertising Walt Disney’s streaming service Disney+ in New York City, U.S., November 12, 2019. REUTERS/Brendan McDermid/File Photo

February 4, 2020

By Lisa Richwine and Neha Malara

(Reuters) – Walt Disney Co’s new streaming service Disney+ reached 28.6 million paying subscribers this week, the company said on Tuesday as it reported quarterly earnings that beat Wall Street forecasts.

Shares of Disney were up 1.5% in volatile trade following the results.

The results showed Disney made a strong entrance into the streaming video wars dominated by Netflix Inc. The owner of sports powerhouse ESPN is trying to transform its business to capture audiences that are moving online.

Analysts at three brokerages had expected more than 20 million subscribers to Disney+, which is available in five countries including the United States. Disney+ will be available in India on March 29 through streaming service Hotstar.

Netflix, which began delivering online video 13 years ago, boasts 67.7 million paid subscribers in the United States and Canada.

Subscribers at Hulu, a streaming service Disney now controls, climbed to 30.7 million as of Monday, the company said. ESPN+ customers reached 7.6 million this week.

“(I) believe we’re now well positioned to not only withstand the disruptive forces of technology but thrive in today’s increasingly dynamic media environment,” Disney Chief Executive Bob Iger said on a conference call.

Speaking on CNBC television, Iger said 50% of Disney+ subscribers came from the company’s own website. He said the service did not experience significant churn after the end of “Star Wars” series “The Mandalorian,” which will return for a second season in October.

Earnings for the quarter grew with help from healthy business at Disney’s theme parks and the strong performance of animated movie “Frozen 2.”

Excluding certain items, Disney earned $1.53 per share, above the average analyst estimate of $1.44, according to IBES data from Refinitiv. Revenue rose to $20.9 billion, up 36% from a year earlier.

The parks, experiences and products division posted operating income of $2.3 billion, up 9% from the prior year. The unit will be hit in the current quarter, however, by the closings of Shanghai Disney Resort and Hong Kong Disneyland in late January to help China stop the spread of coronavirus.

The closings came during the busy Chinese New Year holiday.

The impact of the virus on Disney will depend on how long the outbreak lasts and how far it spreads, Iger told CNBC. He said that advance U.S. bookings at parks had not been affected.

Disney’s direct-to-consumer and international segment, the division that is spending big to build the streaming business, reported an operating loss of $693 million, below analyst expectations.

Operating income in Disney’s media unit, home to ESPN, the Disney Channels and ABC, rose 23% to $1.6 billion.

Profit more than tripled at the movie studio to $948 million.

(Reporting by Neha Malara in Bengaluru and Lisa Richwine in Culver City, Calif.; Editing by Sriraj Kalluvila and Lisa Shumaker)

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