(San Francisco) Disney+ continues to grow at breakneck speed, challenging other entertainment platforms that are slipping, but the Enchanted Kingdom streaming service is going to have to cut costs if it wants to become profitable.
Disney+ now has 164.2 million subscribers, up 12 million from the end of June, far more than market expectations, according to a quarterly earnings release released Tuesday.
But the Californian group’s streaming platforms (Disney+, ESPN+ and Hulu) more than doubled their operating losses over one year, to $1.47 billion for the period from July to September.
The Californian group assured that its losses had reached their “worst” level. “They will start to decline in the current quarter,” promised Bob Chapek, the company’s boss, during the conference call with analysts.
He again assured that Disney+ would achieve profitability in 2024.
The platform will launch on December 8 a new subscription with advertising, for 7.99 dollars per month, while its basic subscription without advertising increases to 10.99 dollars, in the United States.
Like its competitor Netflix, which is launching a similar formula this month, Disney+ hopes to attract even more viewers but also to diversify their sources of income.
Lower costs, raise prices
Bob Chapek also hinted at budget cuts, particularly in marketing expenditure, and the possibility of raising prices further.
“Our history shows that rate increases […] did not translate into significant increases in cancellations. So we think we still have room,” he said.
For the current quarter, Disney+ can count on the film Hocus Pocus 2released on September 30 – “the most viewed premiere in the history” of the platform, indicated Bob Chapek – and Andor, a television series anchored in the very popular universe of Star Wars.
“But subscriber growth will not be linear every quarter,” warned Christine McCarthy, the group’s chief financial officer.
It expects a weak increase in paying users of Disney+ during the holiday season, and a further acceleration in early 2023, especially thanks to international markets.
Streaming platforms have experienced blazing growth for years, further amplified by the pandemic. But Netflix, the industry veteran and leader, had a tough first half, losing nearly 1.2 million subscribers, before bouncing back this summer.
Disney+ is expected to exceed 108 million American viewers by the end of the year, according to figures from Insider Intelligence.
The platform will thus capture more than 45% of American users of streaming services, behind YouTube, Netflix, Amazon and Hulu (which belongs to Disney).
“Record” for amusement parks
In all, Disney disappointed with revenues of $20.1 billion and profits of $162 million, up year on year but below expectations.
Its title lost about 6% during electronic trading after the close of trading on Tuesday – the market expected a turnover of 21.27 billion dollars and a net profit of 797 million.
Its “amusement parks, experiences and derivative products” branch generated 7.4 billion in revenue, up 36% year on year, in the fourth quarter of its staggered fiscal year.
A “record” result indicated Bob Chapek during the analyst conference.
The entertainment giant is benefiting from the pandemic exit and consumer appetite for travel and entertainment after a long period of health restrictions related to COVID-19.