Disney Beats Q3 Estimates As Streaming Flagship Hits 116M Subscribers

Disney exceeded forecasts by Wall Street analysts for its fiscal third quarter, delivering adjusted earnings per share of 80 cents, up from just 8 cents in the Covid-hit period a year ago.

A year and a half after its launch, Disney+ reached 116 million subscribers as of the end of the quarter on July 3. That’s more than twice the level of a year ago, 57.5 million. While it is smaller, ESPN+ added to the overall streaming momentum, rising 75% from a year earlier to 14.9 million subscribers. Hulu, including its on-demand and live TV offerings, increased 21% to 42.8 million total subscribers.

Total revenue of $17 billion jumped 45% over the 2020 quarter as theme parks, sports and motion pictures resumed more familiar operations and the post-pandemic comeback began.

Analysts had expected Disney+ subscribers at 115.2 million, total company revenue of $16.8 billion and earnings per share of 56 cents.

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Disney stock perked up almost 5% on the results in after-hours trading, exceeding $187. It closed the regular trading day up nearly 1% at $179.42. Cooling off after a big rally in the closing months of 2020, Disney shares are essentially at break-even thus far in 2021, with a few intervals of upward and downward movement.

Revenue in the Parks, Experiences and Products division more than quadrupled to $4.3 billion, while the unit swung from a loss a year ago to an operating profit of $356 million. CEO Bob Chapek, who had a stint running the parks division before taking the top job in February 2020, has talked up the company’s efforts to achiever more efficiencies during the pandemic. If those plans are fully executed, he has argued, future quarters will see profit margins rise, he has pledged..

Direct-to-consumer revenue soared 57% to $4.3 billion, and operating losses decreased from $600 million to $300 million, with the company crediting improvement at Hulu. In the company’s earnings release, Chapek touted the aggregate number of streaming subscribers — 174 million — which is shouting distance from Netflix’s industry-leading 209 million worldwide. Comparisons, of course, are inexact for many reasons, and the Hulu and ESPN+ numbers are U.S.-only.

Traditional TV saw a rebound in advertising but comparisons were rough. Linear network revenues for the quarter increased 16% to $7 billion, but operating income decreased 33% to $2.2 billion. The company blamed, among other things, the resumption of live sports, which boosted programming costs. Timing of certain events, like this year’s Academy Awards telecast in April as opposed to early March in 2020, meant that it hit the quarter’s bottom line due to the accounting of the licensing fee paid to the Academy.

The quarter was an active one for the company, especially on the movie front. It released big-budget titles like Cruella via its Premier Access pattern, making it available in theaters and also to Disney+ subscribers for an extra $30.

The release method prompted a lawsuit from Scarlett Johansson this summer when it was deployed on Marvel’s Black Widow. The star asserts that she was shortchanged a significant amount of compensation because Premier Access siphoned away theatrical audiences. In a sharp-elbowed statement in response to the suit, Disney said it was “dismaying” that Johansson was displaying what it called “callous disregard” of those affected by Covid-19.

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