Disney+ has reached 118 million subscribers worldwide, but
analysts had predicted millions more would sign up, resulting in a miss that
saw the entertainment giant's share price slip in after-market trades.
Disney Company chief executive Bob Chapek told analysts on
an earnings call that the two-year-old service has faced some pandemic
headwinds to landing new shows and films.
"Obviously, we are only in year two of the Disney+
launch and the hunger for content for the service is extraordinary," he
said.
"And when you have that happen at the same time that
you have a pandemic and you have to shut down production, that is not a good
combination," he added.
Rival Netflix has promised to significantly bolster its
line-up of original programming after suffering from pandemic-caused production
delays.
Disappointing growth at Disney+ came as the company tried to
regain momentum in its travel and theme park businesses, which have suffered
due to the pandemic.
"We've made great strides in reopening our businesses
while taking meaningful and innovative steps in Direct-to-Consumer and at our
Parks, particularly with our popular new Disney Genie and Magic Key offerings,"
Chapek said.
Impacts on parks and films
Disney also planned a major promotion on Friday to mark the
two-year anniversary this week of the launch of Disney+.
More worrisome for investors, the average monthly revenue
per Disney+ subscriber fell 9 percent year-over-year to $4.12.
In its earnings release, the group attributed the decline to
cheaper subscriptions in some markets, such as India and Indonesia.
It also noted that Disney+ is facing cost increases in terms
of content production, marketing and technology.
But the very popular streaming service benefits from the
controversial strategy of its parent company, which consists of releasing some
films simultaneously in theaters and online, with an additional cost for
subscribers to the platform.
After "Mulan" in 2020, "Black Widow" and
"Jungle Cruise" were released this summer to the great displeasure of
theaters and stars such as Scarlett Johansson, who criticized a loss of
earnings for them.
"When they were putting out blockbuster movies at the
streaming service at the same time as the theaters, that was worth the price of
admission," tech analyst Rob Enderle of Enderle Group said of Disney.
"But, that driver has evaporated."
Disney has changed course of late, letting movies run in
theaters for a while before making it to the streaming service, according to
the analyst.
"If they are going to force you to go back to the
theater again, then Disney+ becomes redundant," Enderle said.
"At some point Disney is going to have to make a
decision to favor the theaters or their service, and it is a hard
decision."
In all, Disney's platforms (Disney+, ESPN+ and Hulu) have
179 million subscriptions and have generated a turnover of $4.6 billion.
The parks and merchandise business doubled its revenue to
$5.5 billion, thanks to the much-anticipated reopening of all its theme parks
worldwide.
"We continue to be impacted by reduced operating
capacities" due to health restrictions, Disney noted in its statement.
Disney also expected costs of making films and operating its
other business to rise, given inflationary pressures being felt across the
economy.
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