Nasdaq 100, Dow Jones, S&P 500: Dow Lower as Disney Shares Drop 5% Amid Subscriber Setback

Highlights

• Streaming losses reduced, but subscribers decline
• Theme parks contribute to strong operating income growth
• Disney plans to expand streaming and cut costs

Overview

Dow Jones Industrial Average futures are down ahead of the cash market opening as investors look toward Thursday’s producer price index (PPI) report and pore over Disney’s latest quarterly results.

At 12:05 GMT, Dow Futures are trading 33501.00, down 101.00 or -0.30%. Dow component Walt Disney is at $95.64, down $5.49 or 5.43% in a pre-market trade. It closed at $101.13 on Wednesday before its earnings report was released.

Disney Reports $400M Reduction in Streaming Losses

During its quarterly earnings report, Walt Disney Co announced a $400 million reduction in streaming losses compared to the previous quarter. However, the company also experienced a decline in subscribers, leading to a 4.4% drop in Disney’s shares during after-hours trading.

The improved performance of Disney’s streaming unit from January to March was attributed to a combination of factors, including a price increase and reduced marketing expenses. This resulted in an operating loss of $659 million, a significant improvement from the previous quarter’s $1.1 billion loss.

Disney+ Loses 4 Million Subscribers, Faces Challenges

Unfortunately, Disney+ lost 4 million subscribers, bringing the total down to 157.8 million. The majority of the decline was seen in the Disney+ Hotstar offering in India, which lost streaming rights to Indian Premier League cricket matches. Additionally, a price increase in December led to a loss of 300,000 customers in the United States and Canada.

Analysts had anticipated Disney to gain over 1 million customers in the quarter, highlighting the challenge of balancing customer acquisition with financial performance. Wall Street has been pressuring media companies to turn streaming investments into profitable ventures to compete with Netflix Inc.

Strong Earnings Despite Subscriber Decline

Despite the decline in subscribers, Disney’s diluted earnings per share met expectations at 93 cents, and revenue slightly exceeded projections, reaching $21.82 billion.

Theme Parks Drive Impressive Growth

On a positive note, Disney’s theme parks performed well, with the Shanghai Disney Resort, Disneyland Paris, and Hong Kong Disneyland Resort contributing to a 23% growth in operating income for the unit, reaching $2.2 billion compared to the previous year.

Plans to Expand Streaming

Looking ahead, Disney plans to expand its streaming offerings by integrating Disney+ and Hulu into a single app, enhancing the viewing experience for subscribers and providing more opportunities for advertisers. An ad-supported option will also be introduced to Disney+ in Europe by year’s end.

Disney CEO Iger Revamps Company

CEO Bob Iger, who returned to address the company’s challenges, announced a comprehensive revamp, including a commitment to cost reduction of $5.5 billion and 7,000 job cuts. Iger stated that the company is on track to exceed the targeted cost reduction figure.

While Disney focuses on streaming, its traditional television business faces obstacles. Operating income at linear networks dropped 35% compared to the previous year, primarily due to higher costs associated with sports programming and production. Lower advertising revenue at ABC and its owned television stations also contributed to the decline.

During the investor call, Iger addressed an ongoing legal dispute with Florida Governor Ron DeSantis, emphasizing that Disney’s investments, job creation, and tax contributions to the state are contingent upon support from local politicians.

Disney’s Quarterly Report: Mixed Results, Expansion Plans

In summary, Disney’s quarterly report showed a reduction in streaming losses but a decline in subscribers. Despite this, the company’s financial performance met expectations, and its theme parks performed well. Disney aims to expand its streaming offerings, surpass cost reduction targets, and navigate challenges in the traditional television business. The outcome of the legal dispute with the state of Florida remains uncertain.