By Erich Schwartzel and Allison Prang
LOS ANGELES -- The streaming boom that defined Hollywood during
Covid-19 is slowing down for now.
Weeks after Netflix Inc. announced its subscriber sign-ups had
slowed amid a reopening economy, Walt Disney Co. said its flagship
streaming service, Disney+, also added fewer users than Wall Street
had expected after months of torrential growth.
Disney+ added 8.7 million subscribers in the fiscal second
quarter, bringing its quarter-end total to 103.6 million
subscribers, compared with 94.9 million on Jan. 2. Analysts polled
by FactSet were expecting 109.3 million subscribers after a quarter
that saw massive hits on the service from the company's Marvel
Disney shares fell more than 4% in after-hours trading.
The winners of the Covid-19 economy aren't the same as those who
win in the reopening, and this quarter found Disney in a messy
middle. The end of lockdowns and mask mandates, while good news for
Disney's lucrative parks division and studio releases, presents
fresh headwinds for an 18-month-old streaming operation that has
lifted shares to record highs and given the company some of its
biggest hits in recent years, from Baby Yoda to "WandaVision." More
than a year of quarantines and stay-at-home orders accelerated an
industrywide shift toward direct-to-consumer services that made
subscriber growth -- and not box-office sales -- the leading metric
of studios' success.
Nowhere was that more pronounced than at Disney, where the
streaming service passed the 100-million-subscriber mark in March,
cementing its status as the most successful streaming entrant since
Netflix defined the field years ago.
That growth had been a lifesaver for Disney shares, which
plummeted to their lowest point since 2014 when the pandemic hit in
March 2020 but had rebounded to record highs a year later. Shares
have been on a slight downward trend since, hovering around
Netflix shares are down more than 11% since the company
disclosed on its earnings call last month that the reopening was
leading to a slowdown in sign-ups. "There's a boost in engagement
that you get when people are in a lockdown situation," Netflix
operations chief Gregory Peters said at an investor event in
Disney has taken steps to boost its streaming revenue,
increasing subscription costs by $1 to $7.99 a month in late March.
The company said the price hike didn't result in any significant
The slowdown could present challenges for newer entrants in the
streaming ecosystem, such as HBO at AT&T Inc.'s WarnerMedia and
ViacomCBS Inc.'s Paramount+, both of which had splashy launches in
the middle of stay-at-home orders.
Earlier this month, ViacomCBS said the service added 6 million
subscribers in the first quarter, growing to 36 million subscribers
globally. ViacomCBS also said its Pluto TV ad-supported streaming
service now reaches about 50 million monthly active users, an
increase of about 6 million users in the quarter.
Meanwhile, the company's parks, experiences and products
business -- which includes its storied Disney World and Disneyland
resorts -- saw a 44% drop in revenue compared with a year earlier.
That division reported an operating loss of $406 million in a
quarter that saw parks either closed or open with capacity
Overall, Disney's total revenue fell 13% from the comparable
2020 period to $15.61 billion. According to FactSet, analysts were
expecting $15.86 billion.
The reopening economy that caused the slowdown in streaming
sign-ups has enabled other parts of Disney to resume some degree of
normalcy. Disneyland Resort in Southern California reopened last
month after being closed for 412 days.
Disney Chief Executive Bob Chapek said he expects to see "an
immediate increase" in the number of people allowed inside the
domestic parks in light of Thursday's announcement from the Centers
for Disease Control and Prevention stating that fully vaccinated
people can meet indoors and outside without wearing a mask.
"Today's guidance," he said, "is very big news for us,
particularly if anyone has been in Florida in the middle of summer
with a mask on."
The company's studio operations are nearing full production
levels on film and TV after months of Covid-related delays and
shutdowns, Mr. Chapek said, which could boost Disney+ inventories
and goose subscriber rates as highly anticipated shows premiere in
the coming months.
And two 2021 films, "Free Guy" and "Shang-Chi and the Legend of
the Ten Rings," will premiere exclusively in theaters without a
Disney+ component, he added. Both films will have an exclusive run
in theaters for 45 days, or about half the amount of time afforded
movies in the pre-pandemic era.
The company has two major releases on the docket for this
summer, "Cruella" and "Black Widow," that will be released on the
big screen but also offered for home viewing on Disney+ for an
additional $30. On Thursday, Disney announced its July 30 release,
"Jungle Cruise," starring Dwayne Johnson and based on a Disneyland
theme-park ride, will also be released in theaters and for $30
Disney logged $901 million in net income, or earnings of 49
cents a share. A year earlier, the company's earnings were $460
million, or 25 cents a share. The company's tax expenses a year ago
were higher, which hurt its year-earlier results, and the company
also logged $305 million in net other income for the recent
Adjusted earnings were 79 cents a share, while analysts were
expecting 26 cents a share, according to FactSet.
--Benjamin Mullin contributed to this article.
Write to Erich Schwartzel at email@example.com and
Allison Prang at firstname.lastname@example.org
(END) Dow Jones Newswires
May 13, 2021 19:38 ET (23:38 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.