Thursday's Market Minute: Walt Disney's (DIS) Streaming Business Seen Lacking Some Magic

Walt Disney DIS shares are lower in reaction to the company’s second quarter print, which came in as expected, but the media mogul signaled a drop in Disney+ subscribers. The streaming segment of Disney took center stage during CEO Bob Iger’s conference call after-hours, with Iger providing some context for the highly speculated, unprofitable aspect of its business.

Disney+ subscribers decreased 2% year-over-year to 157.8M. However, average revenue per Disney+ subscriber increased 13% year-over-year to $4.44. ESPN+ subscribers were up 2%, while Hulu subscribers came in flat.

Iger said with a "significant step toward creating a growth business: I'm pleased to announce that we will soon begin offering a 'one-app' experience domestically that incorporates our Hulu content via Disney+.” He said the one-app offering will launch by the end of 2023.

Iger’s commentary regarding their direct-to-consumer business was still optimistic, as he said they’ve only begun to scratch the surface of how advertisers can utilize Disney+. He also said an ad tier will be launching on Disney Europe by the end of the year, and they will additionally be raising prices for the basic ad tier.

Disney’s CFO noted the company will be pulling content from its DTC services and taking an impairment charge falling between $1.5B-$1.8B, which is expected to impact their third quarter. 

Iger also made note of their overwhelming efforts to operate more efficiently, largely seen as part of Disney’s near 7,000 layoffs. He said the cost-cutting initiatives announced last quarter are well under way, and they are on track to meet (or exceed) their target of $5.5B.

Coinciding with Disney’s quarterly report, Berkshire Hathaway’s Warren Buffet gave remarks that video streaming isn’t a “very good business” because it attracts subscribers at a terrible price. Buffett is a significant holder of Paramount Global (PARA) – which has drastically underperformed Disney on a 12-month basis, falling 42% through Wednesday’s close. Warner Brothers Discovery (WBD) is down almost 25% over the last year, while Disney has only lost 6% over that same period. Netflix (NFLX) – despite being stuck somewhat range-bound for the last several months, is up almost 89% over the last year.

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