Disney+’s slow growth is worrying Wall Street

By Frank Pallotta, CNN Business

Disney’s streaming service continues to grow — just not as strong as investors on Wall Street were hoping.

The streaming service now has 118.1 million subscribers. That’s higher than the 116 million the company reported in August, but a softer-than-expected result that sent shares down as much as 4.5% in after-hours trading.

Overall, Disney nabbed $18.5 billion in revenue in the quarter, which was up 26% from last year. That’s slightly worse than the $18.8 billion that analysts were expecting.

Bob Chapek, Disney’s CEO, said in the company’s letter to investors on Wednesday that the company is “extremely pleased with the success of our streaming business,” which also includes Hulu and ESPN+.

“We continue to manage our DTC business for the long-term, and are confident that our high-quality entertainment and expansion into additional markets worldwide will enable us to further grow our streaming platforms globally,” he said.

Disney added roughly two million subscribers in the recent quarter, far fewer than the 12 million the company added in the quarter before that.

It wasn’t that long ago — earlier this year, in fact — that Disney+ was the brightest star in Disney’s kingdom.

As the company was battered at its parks and theatrical units because of the coronavirus pandemic, Disney+ was a makeshift lifeboat that helped the company weather the storm.

The streaming service — which celebrates its two-year anniversary this week — grew at a breakneck pace, hitting the milestone of 100 million subscribers in March. This made it one of the most successful streaming services in the market and a direct competitor to Netflix — the leader in the streaming world.

That growth has now leveled out, which Chapek warned about in September when he said that the fourth quarter’s Disney+ growth could slow down.

In an earnings call with analysts, Chapek once again made the point that the company is focusing on growing its streaming business for the “long term” rather than merely “quarter to quarter.”

Disney+’s sluggish numbers spooked investors on Wednesday. The reasons why they were so lackluster are complex and likely due to a myriad of factors.

For starters, the streaming marketplace has gotten more crowded since the service launched in 2019. And while the global health crisis is ongoing the restrictions that have kept people home in 2020 have eased.

But keep in mind that Disney is an enormous company, and beyond its primarily digital businesses its operations in the physical world had a nice quarter.

The company’s Parks, Experiences and Products unit — which covers theme parks and merchandise — showed a solid recovery from the pandemic. The unit’s revenue grew to $5.4 billion in the fourth quarter — a 99% jump from the $2.7 billion a year ago.

The-CNN-Wire
™ & © 2021 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.