Disney's Latest Quarterly Report Was Magic-Free

On Wednesday, The Walt Disney Company DIS reported a mixed fiscal third quarter. Although its flagship sports network ESPN struck a $2 billion deal with Penn Entertainment Inc PENN to launch ESPN Bet, a branded sportsbook, Disney is facing a streaming slowdown while undergoing massive restructuring. But, there are still no signs that magic has been restored at its entertainment kingdom. 

Financial Highlights

Revenue for the quarter that ended in July amounted to $22.33 billion as it rose 4% YoY, but below the $22.5 billion that Refinitiv expected. Due to $2.65 billion in one-time charges and “content impairments that came as a result of Disney pulling off content and ending third-party licensing agreements, the entertainment company made a rare quarterly net loss that amounted to $460 million, or 25 cents per share. The adjusted EPS per share $1.03 per share, topping Refinitiv’s consensus estimate of 95 cents. 

Streaming

The entertainment giant lost streaming subscribers as total subscriptions for Disney+ amounted to 146.1 million, translating to a drop of 7.4% which was worse than Wall Street expected as analysts anticipated 151.1 million. The majority of losses were a result of losing the rights to Indian Premier League cricket matches which costed Disney+ Hotstar a 24% drop in users. As Disney continues to work on cutting $5.5 billion in costs this year, streaming losses amounted to $512 million, significantly beating estimates of $777 million and marking a great improvement from last year’s comparable quarter when it lost $1.1 billion.

Parks And Experiences

The division that suffered the most during the pandemic was a rare bright spot of this report as its revenue rose 13% to $8.3 billion, owed mainly to international parks as domestic ones, especially in Florida, experienced a slowdown. The similar trend was reported by Comcast Corporation CMCSA for its Florida-based theme parks.  Iger remains hyper-focused on profitability, possibly risking his legacy

Capital expenditures for the full year are expected to amount to $5 billion, lowering the prior guidance of $6 billion. In response to losing users and falling revenue, Disney will be raising the price of its ad-free streaming offering in October. It will also follow the footsteps of Netflix NFLX by cracking down on password sharing. 

All in all, Disney CEO Bob Iger only got to retire for 11 months and his return will last even longer than initially expected as its latest contract ends in 2026. Iger has difficult tasks on his hands, from the slumping TV business, streaming losses and the striking writers and actors. The once America’s most beloved CEO is now facing criticism for stating that the creative community has unrealistic expectations and for soullessly cutting costs. Meanwhile, its streaming rival, Netflix, ventured into cloud gaming amid content shutdown, as a strategy to increase engagement. Netflix is considered as the number one enemy in the ongoing strike yet the streaming king somewhat insulated itself from the content pause. Unlike Disney+, Netflix is enjoying record subscriber numbers and it owes to its expansion, international production and crackdown on password sharing. For now, the strike of writers and actors is taking less of a tool on Netflix than on Disney so Iger certainly hasn’t lost his touch by choosing the follow Netflix’s footsteps. The only problem is, it might cost him the adoration he enjoyed throughout his long-spanning career. 

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