The news: Disney reported earnings for its fiscal Q1 Wednesday in the first major test for newly reinstated CEO Bob Iger and the new ad-supported tier for Disney+. The company topped analyst expectations but showed weakness in key areas, with subscriptions and average revenue per user (ARPU) for many streaming offerings declining.
- Revenues grew 8% year over year to $23.5 billion, eking out just above analyst expectations. At 99 cents per share, profits exceeded analyst expectations of 78 cents.
- Though Disney warned that its strong Q3 subscriber growth for Disney+ would bottom out, subscriptions actually decreased from 164.2 million in Q4 to 161.8 million in Q1 in the service’s first-ever loss, possibly because of a price hike for Disney+ implemented late last year. ESPN+ and Hulu subscriptions, however, rose 600,000 and 800,000, respectively.
In a call with investors, Iger said Disney will undergo reorganization and cut 7,000 jobs. Iger also said he expects Disney+ to be profitable by the end of 2024.
Disney+ with ads lands with a thud: In the first quarter with its new ad-supported subscription tier, Disney+ failed to deliver the revenue increases Disney hoped for after a difficult previous quarter.
- Average monthly revenue per user (ARPU), a figure streamers are anxious to increase, fell from $6.10 to $5.95. Disney attributed the loss to “a higher mix of subscribers to multiproduct offerings.”
- The new ad-supported subscription tier for Disney+ was reminiscent of Netflix’s Q4 struggles. The tier failed to drive meaningful subscription or revenue growth, but Disney’s still-large viewership and brand recognition means the tier will have a longer lead time toward finding success.
- Disney also showed weakness in key markets. Disney+ Hotstar, the version of Disney+ available in India, lost 6% of its subscribers in one quarter, though ARPU increased 16 cents to 74 cents.