The Walt Disney Company surprised analysts Wednesday with stronger-than-expected revenue but offered mixed messages about its streaming services.
Disney reported on August 10 that profits exceeded $1.4 billion, and there was a 26% spike in revenue for its third-quarter earnings. The company also lowered its forecast on Disney+ subscribers and raised the prices of its streaming offerings.
The global mass media and entertainment company outlined plans for a new ad-supported tier service and said nearly all of its streaming service’s growth was coming from overseas.
The company added 14.4 million Disney+ subscribers in the third quarter, bringing its combined subscriber count to 221.1 million, surpassing Netflix in total subscribers for the first time in history. Disney’s streaming service narrowly missed its forecast of 230 million to 260 million subscribers the company set back in 2020.
Bob Chapek, chief operating officer for The Walt Disney Company, attributes the strong operating results last quarter to “compelling new storytelling” across the conglomerate’s many platforms and “unique immersive physical experiences that exceed guest expectations.”
Disney Parks, Experiences, and Products revenues increased to $7.4 billion compared to $4.3 billion the year prior.
Disney’s Direct-to-Consumer revenues rose 19% to $5.1 billion, while operating losses increased by $0.8 billion to $1.1 billion. The report stated, “The increase in operating loss was due to a higher loss at Disney+, lower operating income at Hulu, and, to a lesser extent, a higher loss at ESPN+.”
Lower results at Disney+ reflected higher programming and production, technology, and marketing costs, partially offset by increases in subscription and advertising revenue, the company said.
To manage the higher business costs, Disney planned to launch a new tier of Disney+ with advertising on December 8. The ad-free version of the service will cost $10.99 a month, a 38% price increase for viewers who want to stay ad-free. Disney+ subscribers currently pay $7.99 a month for the streaming service.
The price increase may cause some customers to cut the service, but the company doesn’t predict price increases will result in any significant loss of streaming customers. “We believe that we’ve got plenty of price value room left to go,” Chapek said.
If Disney theme parks stay packed, the company says price increases will follow.
“We read demand. We have no plans right now in terms of what we’re going to do, but we operate with a surgical knife here,” Chapek told CNBC. “It’s all up to the consumer. If consumer demand keeps up, we’ll act accordingly. If we see a softening, which we don’t think we’re going to see, then we can act accordingly as well.”