Disney+ Reaches 130M Subscribers, Beats Wall Street Estimates

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The Walt Disney Co. beat Wall Street expectations in its latest quarterly earnings report. The company reported revenue of $21.8 billion and net income of $1.1 billion, with earnings per share of $1.06.

Wall Street expectations were for revenue of $18.78 billion and EPS of $0.58.

The streaming business is where Wall Street is placing much of its focus, and the company updated its efforts in the space Wednesday, with Disney+ adding 11.8 million subscribers last quarter to hit 129.8 million total. Hulu added 6.6 million subscribers to reach 45.3 million subs (likely driven by an aggressive Black Friday offer at a $1 per month rate), and ESPN+ added 4.2 million subscribers to reach 21.3 million.

Disney CFO Christine McCarthy told analysts Wednesday that growth is expected to increase faster in the second half of the year.

Average revenue per user (ARPU) improved significantly at Disney+ to $6.68, up 15 percent from a year prior, thanks to fewer wholesale customers.

Still, the company’s quarter was significantly better than the same quarter a year prior, when most parts of the business were still being impacted by the novel coronavirus pandemic.

Theme parks in particular saw a significant turnaround, generating revenue of $7.2 billion, more than double the same quarter a year prior.

Disney’s linear networks had revenue of $7.7 billion, about flat from the same quarter a year ago, with direct-to-consumer rising by 34 percent year over year to $4.7 billion.

Costs at all of the company’s streaming and linear businesses were on the rise, driven by increasing productions costs and sports rights.

On the earnings call, McCarthy said that linear content spend will increase by about $500 million next quarter, while spend in the DMED division will rise by $800 million to $1 billion. All told, Disney plans to spend $33 billion on content in fiscal 2022, with McCarthy saying that about one-third of that number is sports rights.

And the cost of those sports rights may yet rise further. Speaking to CNBC after the closing bell, Disney CEO Bob Chapek confirmed that the company was bidding for the NFL’s Sunday Ticket package. Chapek also said on the company’s earnings call that Peyton and Eli Manning have signed a new deal with ESPN that will see them bringing alternative broadcasts (as they do on Monday Night Football) to other programming, including UFC.

Disney is set to celebrate its 100th anniversary in the coming year, with Chapek telling analysts Wednesday that “as we approach that remarkable milestone, I am filled with optimism.”

He also reiterated the three “strategic pillars” he outlined for the company last month, noting that “nearly all” of the company’s top creative executives have recently signed new deals.

On the issue of how Disney chooses to release its movies, Chapek reiterated that audiences will be the “north star.” He used the animated family film Encanto as an example, saying that while it did muted business in theaters because of the ongoing pandemic, it was a smash success on Disney+, becoming the fastest movie to cross 200 million hours of viewing.

“We do not subscribe to the belief that theatrical releases are the only way to build Disney franchises,” Chapek said, adding that the film also drove consumer products sales and topped the Billboard charts.

These results are exactly what you would expect from a Disney franchise, and we are thrilled that Disney+ was the catalyst,” he said.