Disney's streaming woes continue
Disney's streaming service, Disney+, lost 4 million or 2% paid subscribers in Q2 FY23, ending the quarter with 157.8 million users.
The decline was mainly due to an 8% quarter-over-quarter fall in Disney+ Hotstar subscribers to 52.9 million, likely caused by the loss of Indian Premier League cricket rights. Further, North American Disney+ subscribers dropped 300,000 to 46.3 million. ESPN+ subscribers increased 2%, while Hulu's subscriber count remained essentially flat on a quarter-over-quarter basis.
Revenue Increase
Despite the decline in subscribers, Disney+ revenue increased 13% year-over-year to $21.8 billion. An increase in prices drove a 13% rise in global Disney+ average revenue per paid subscriber to $4.44, with a decline in the metric for Disney+ Hotstar being more than offset by a 20% rise in North American average revenue per user.
Analyst Reactions
Following the results, Citigroup analyst Jason Bazinet reiterated a Buy rating on DIS stock with a price target of $130. Bazinet believes that the lower Q2 FY23 subscribers and improved direct-to-consumer segment profitability were likely the results of the price hikes implemented in December.
Company Outlook
During the fiscal Q2 earnings call, CEO Robert Iger said that the loss of subscribers to the company's "substantial" pricing hike for the non-ad supported Disney+ offering was "insignificant." However, the company expects the "softness" seen in Q2 domestic Disney+ net additions to continue in Q3 FY23. That said, it expects core subscription growth to rebound in Q4 FY23.
Looking ahead, Iger announced on the earnings call that the company would bundle Hulu+ with Disney+ into one app later this year. The CEO believes that this integration will help boost advertising and engagement and reduce churn.
In conclusion, despite the decline in subscribers, Disney+ revenue increased, and Citigroup analyst Jason Bazinet remains optimistic about the stock's future. However, Disney and other streaming service providers like Netflix are facing macro pressures and intense competition in the streaming space, which are impacting profitability. Investors should carefully consider these factors before deciding whether to buy Disney stock.