The Walt Disney Co.'s streaming-centric strategy is paying off, at least in subscriber numbers.
The company on Feb. 11 reported fiscal first-quarter results impacted by the COVID-19 pandemic. Its theme parks, products, TV advertising and theatrical film business were particularly hard hit. But streaming service Disney+ led a group of streaming offerings that anchored growth at the company.
"Disney+ has exceeded even our highest expectations in just over a year since its launch, with 94.9 million subscribers as of the of the end first fiscal quarter," CEO Robert Chapek said during the company's earnings conference call. The streaming service added more than 21 million new subscribers.
Disney had more than 146 million total paid subscriptions across its streaming services at the end of the quarter.
Disney+ Hotstar contributed to about 30% of the platform's global growth, and the launch in Latin America also added to the total. Disney+ average revenue per user was $4.03. Excluding the Hotstar international offering, that figure was $5.37. Disney took control over Hotstar in a deal with Fox.
The company on Feb. 23 will also launch Star, an international general entertainment offering, across Europe, Canada, Australia, New Zealand and Singapore. Star will be integrated into Disney+, Chapek said.
The Disney+ growth comes as the company revamps its theatrical film strategy in the wake of pandemic-era theater closures. The company's animated film studio Pixar released feature film "Soul" on its streaming platform for a Premier Access fee the same day the movie debuted in theaters, on Christmas Day. That film has since tallied over $100 million in box office receipts.
"Our goal is to increasingly put the consumers in charge and let them decide when and how they want to enjoy our one-of-a kind entertainment offerings," Chapek said. He later added that the company is "remaining flexible" about its distribution strategy between theatrical releases and streaming debuts.
The next major theatrical release the company has planned is Marvel title "Black Widow," which is slated for a May debut. The company intends to stick to that plan, but Chapek said it is "watching very, very closely" for any developments regarding theater reopening and consumer sentiment for a potential shift in strategy.
The company reported streaming subscribers on its other platforms, ESPN+ and Hulu, of 12.1 million and 39.4 million, respectively, and growth under all three streaming brands contributed to improved performance across its direct-to-consumer subsegment, CFO Christine McCarthy said. Hulu and Disney+ specifically contributed to outperformance compared to company expectations.
Direct-to-consumer revenues for the company grew by 75% to $3.50 billion, up from $2.03 billion reported in the prior-year quarter. Operating losses under its direct-to-consumer business contracted to $466 million, up from a loss of $1.11 billion reported in the January 2020 quarter.
For Disney+, executives reiterated their expectation that it would hit peak losses on the platform in 2021, and it would reach profitability in 2024, despite the platform's outperformance. They also reiterated the expectation that the service would feature 100-plus new Disney+ titles per year as it matures.
"We are continuing to invest in high-quality content. We believe that content is the single biggest driver to not only acquiring subs but retaining them. We're also going to have some other cost drivers that we just to factor into our timing for profitability. And that includes marketing technology, customer service and just other expenses of running a new business," McCarthy said.
Net income attributable to Disney for the quarter ended Jan. 2 was $17 million, or 1 cent per share, down from $2.11 billion, or $1.16 per share, in the same period a year earlier. Excluding certain items for comparability, diluted EPS for the quarter decreased 79% to 32 cents from $1.53 in the prior-year quarter.
The consensus EPS estimate for the just-ended quarter was a loss of 34 cents on a normalized basis and a loss of 71 cents on a GAAP basis.
