Disney slides after streaming subscriptions come up short

Walt Disney Co. attracted fewer streaming customers than expected last quarter, stoking fears that a key engine of the century-old company’s transformation is losing momentum.

The entertainment giant reported 103.6 million Disney+ customers at the end of last quarter, shy of the 110.3 million projected in the Bloomberg Consensus. Shares fell as much as 5.3 per cent in extended trading on the news.

The results marked a rare stumble for Disney+, which has enjoyed explosive growth over the past year and a half, elating investors along the way. After its launch in November 2019, the service quickly became a formidable rival to Netflix Inc. and contrasted with pandemicfueled declines in other Disney businesses.

A lack of new programming made it harder for Disney to lure subscribers. Production delays caused by COVID-19 have taken a toll on the company, along with other streaming services. Netflix also posted disappointing subscriber numbers last quarter, citing a dearth of programming.

“What drives new sign-ups is the content — there has been limited new content,” said Markus Hansen, an analyst at Vontobel Quality Growth. “Disney still has room to run.”

Disney announced a new seven-year agreement with Major League Baseball on Thursday by which the company pay less overall for fewer games.

Quarterly profit came in ahead of projections. Excluding some items, Disney’s earnings rose to 79 cents a share, compared with a 32-cent average estimate. But sales fell to $15.6 billion, missing estimates of $15.9 billion for the period ended April 3.

The company’s streaming revenue per subscriber also declined last quarter, falling 29 per cent to $3.99 a month due to the launch of a less-expensive service in India.

Disney’s traditional TV business, meanwhile, posted a profit of $2.85 billion — a 15 per cent increase from the same period last year. Higher affiliate fees and lower programming costs countered a drop in advertising.

Disney shares fell as low as $168.93 in extended trading after the results were posted. The company also said Thursday it was nearly back to full production levels for film and TV.

“Overall there’s still a lot of confidence,” Hansen said.