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Disney avoids Netflix’s fate as streaming subscriptions grow

By Frank Pallotta, CNN Business

Disney’s streaming numbers were under the microscope on Wednesday after Netflix’s stock tanked last month following its first subscriber loss in a decade.

Luckily for the House of Mouse and its investors, Disney+ grew.

The streaming service now has 137.7 million subscribers — a gain of roughly 8 million in the company’s fiscal second quarter. Those results beat expectations and calmed Wall Street’s nerves about the streaming market after Netflix missed so badly with its user growth last month.

The results sent shares up as much as 4.5% in early after-hours trading, but the stock’s momentum reversed and then fell 3%.

Disney notched $19.2 billion in revenue for the quarter, up 23% from last year. The company reported a net profit of $470 million in the second quarter, down 48% from a year ago.

Bob Chapek, Disney’s CEO, said in the company’s letter to investors Wednesday that Disney’s results “once again proved that we are in a league of our own.”

“As we look ahead to Disney’s second century, I am confident we will continue to transform entertainment by combining extraordinary storytelling with innovative technology to create an even larger, more connected, and magical Disney universe for families and fans around the world,” he added.

Chapek’s reference to “a league of our own” seems somewhat pointed given the extremely bad year that Netflix has had so far in 2022.

Netflix, which is currently the streaming leader with 221 million subscribers globally, reported in April that it lost 200,000 users in the first quarter of 2022 and expects to lose another two million users in the second quarter. The subscriber loss and bad guidance led investors to question the future of Netflix and even the entire streaming marketplace. Its stock has since lost about half its value.

Disney+’s better-than-expected growth shows that Netflix’s problems may be unique to the streaming service rather than a market wide issue — for now, at least.

As if to further that point, Disney reported that all of its streaming services — which includes Hulu and ESPN+ — grew in the second quarter. The company’s services now have 205.6 million users.

Those totals may continue to grow for Disney with its previously announced ad-supported tier, which will debut in the US by the end of the year, according to Chapek. (It was reported on Tuesday that Netflix’s new lower-priced ad tier may also come by year’s end.)

That said, building a successful streaming services is costing Disney gobs of money.

The company’s loss in its direct-to-consumer unit was $887 million in the second quarter — more than triple than it was a year ago. Disney attributed the lower results at Disney+ to “higher programming and production, marketing and technology costs, partially offset by an increase in subscription revenue.”

Elsewhere in the Disney media kingdom, the company’s Parks, Experiences and Products segment notched $6.6 billion in revenues — more than double from a year ago because of attendance increases at Disney parks, hotels and cruise ship sailings as Covid restrictions have eased, the company said.

“Our domestic parks and resorts were open for the entire current quarter, whereas Disneyland Resort was closed for all of the prior-year quarter, and Walt Disney World Resort operated at reduced capacity in the prior-year quarter due to COVID-19 restrictions,” the company said.

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Article Topic Follows: cnn-business-consumer

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