Disney’s Q2 FY23 Earnings Results Webcast

[MisterPenguin]

Q: tell us more about streaming and linear

A: Bob: ESPN plans remain the same (mostly moving to streaming). In 2015/2016 we saw the decline of linear, so, what we're doing is to respond in that.

We have the tech for advertisers to automatically buy time online and then push it to users granually.

 

[TP2000]

Softness with D+ subscribers are continuing through next quarter (but will rebound Q4) and they expect their losses to worsen by 100mil next quarter due to content 'spend'. The market did NOT like that.

It's trending on Twitter and in the last 45 minutes all of the big financial and media industry news outlets are carrying that as their headline. Warranted or not, it's the Big Scary Headline they are using, so an after hours stock drop is almost guaranteed.

Disney stock falls as Disney+ subscribers decline amid push to lose less money in streaming

Walt Disney Co. shares declined in late trading Wednesday following an earnings report that showed Disney+ subscribers declining in recent months.

www.marketwatch.com

Disney+ Sheds 4 Million Subscribers in Second Straight Quarterly Drop, Streaming Losses Narrow by 26%

UPDATE: During Disney’s earnings call, CFO Christine McCarthy announced Disney is “in the process of reviewing the content on our DTC services to align with the strategic changes in our approach to…

variety.com

Disney Earnings: Stock Slips As Disney+ Bleeds Millions Of Subscribers

The entertainment conglomerate lost four million subscribers for Disney+ last quarter while raking in $2 billion in profits from its theme parks.

www.forbes.com

Disney Stock Falls After Surprise Decline in Disney+ Subscribers

Disney stock is up 17% this year, but down 4% over the past 12 months.

www.barrons.com

 

[CaptainAmerica]

Reading the tea leaves, it sounds like Hulu will either be sold to Comcast and merged with Peacock or shut down and merged with Disney+. I don't think there will be a thing called "Hulu" three years from now.

 

[MisterPenguin]

Q: Barclay -- why isn't Hulu more profitable? What's its future?

What's up with parks? and cruises?


A: Bob -- not fully determined with the buy-out of Hulu from Comcast. We're liking the idea of bringing Hulu's general audience (i.e., adults) to D+ (4 quadrants!!). Still have to negotiate it out.

Chrstine -- we expect a good year. We also expect increase cost (wages, inflation, new offerings, new cruise ship). Cruise business is back strongly.

 

[Indy_UK]

Said for ages Hulu content may as well be moved into Disney+

Problem is that they can’t sell the platform with no content as it’s worthless but just shutting down and moving over the content sounds like a missed opportunity to recoup some $$$

 

[MisterPenguin]

Q: Guggenheim -- DTC ads... what's up with that?

AI, what's up with that? Protecting IP?


A: Bob -- AI has opportunities and benefits. Used for efficiencies with what customers want and are doing. It could be disruptive. Legal team is already on it.

Christine: Ad tier for D+. It's still brand new. Getting new subs at that tier which has less of a ad load compared to Hulu. Ad tier coming to Europe by the end of the year.

 

[MisterPenguin]

Oh good, I didn't go deaf.

 

[MisterPenguin]

Q: more about hulu marrying D+? Should there still be individual streams or is packaging the only way to go?

Is fiscal q3 the peak for D+ losses?


A: Bob -- The addition of Hulu with D+ is for those who already are subbed to both... for now. Outside the U.S. it's pretty much what's happening with the Star portal.

Christine -- peak losses were in 4Q 22. Now it just gets better with the exception of contractual losses in Q3 23.

 

[BrianLo]

Also: Backing down out of low income places (India)

HotStar has always been nonsense empty subscriber numbers, in an emerging market. But seeing how low the ARPU is going versus the sporting rights costs they needed to keep them, it just doesn't make sense.

The whole panic attack over the subscriber loss this quarter is primarily India driven.

It's too bad, but the market just doesn't seem to be proving viable for them yet. This puts off a park there probably for a few more decades.

The stock market is being so fickle though. Despite the loses dramatically improving from Q4 22, all it seems to care about again is subscriber numbers.

 

[doctornick]

Said for ages Hulu content may as well be moved into Disney+

Probable is that they can’t sell the platform with no content as it’s worthless but just shutting down and moving over the content sounds like a missed opportunity to recoup some $$$

Well, in theory they could sell the Live TV platform separately from the streaming content of Hulu. I agree it wouldn't be worth that much without the content and separate streaming service; however, it could be integrated into another company's streamer (i.e. Peacock with Live TV, Paramount+ with Live TV, etc) if it had value.

 

[Indy_UK]

Do people still believe there is resistance to put adult/ general entertainment into Disney+ like they have done with Star in Europe?

I remember years ago US soccer moms saying that doing so was going to damage the Disney brand and their kids

The parental locks seem to work fine here in the UK, possibly too well as my sons account can’t even view content like the 90s Rescue Rangers and I am not going to deny him of that

 

[Sirwalterraleigh]

So they’re trying to combine all the services to “save cost and meet guest demands”?

That looks an awful lot like a cable bundle

And we students of history need to remind that a big reason cord cutting intensified was because of decades of detestation of forced bundles

 

[TP2000]

The stock market is being so fickle though. Despite the loses dramatically improving from Q4 22, all it seems to care about again is subscriber numbers.

Is there an analogy where the market would be happy about a company losing 4 million customers?

I can't think of one, but I'm open to suggestions.

Admittedly, my understanding of free market economics is happily stuck in the 20th century and I have NEVER understood how streaming makes any real money for any studio, so maybe there's some trendy new business strategy that says it's good to lose 4 million paying customers in one quarter?

But apparently the American free market still works the same today as it did for the previous 275 years. When you lose a bunch of paying customers, that's still considered bad by the market and your stock decreases.

 

[doctornick]

Is there an analogy where the market would be happy about a company losing 4 million customers?

I can't think of one, but I'm open to suggestions.

Admittedly, my understanding of free market economics is happily stuck in the 20th century and I have NEVER understood how streaming makes any real money for any studio, so maybe there's some trendy new business strategy that says it's good to lose 4 million paying customers in one quarter?

But apparently the American free market still works the same today as it did for the previous 275 years. When you lose a bunch of paying customers, that's still considered bad by the market and your stock decreases.

The point is that they made more money (well, lost less, but same difference) despite fewer customers this quarter due to increased sub fees and advertising revenue. Revenue per subscriber was up a decent bit (20% in the US!) which seems more important than a relatively small drop in subscribers.

Wall Street generally cares more about revenue/profits than just the number of customers typically.

 

[TP2000]

And we students of history need to remind that a big reason cord cutting intensified was because of decades of detestation of forced bundles

No kidding! Great point.

All I know is that streaming never seems to pencil out on my dampened cocktail napkin whenever I try to make the math work. I'm just thrilled that Netflix makes it so easy, a few seconds of work with my remote control, to cancel and re-subscribe. I re-subscribe for one month to watch the latest season of The Crown and a few other fun things I may find, then cancel and wait another year to re-subscribe for the next season of The Crown.

That can't be the business model Netflix wants, but it's the business model they have.

And so does Disney+. I am sure there are families subscribing for summer vacation and Christmas, then cancelling for six months until school is out again and the summer/holiday blockbusters show up on Disney+. How on earth that makes Burbank any money instead of that same family buying 4 movie tickets two or three times per year, I'll never know!

 

[Nubs70]

unless something else, seems the drop in subscriber count is weighing more than the reduction in losses as the stock is down $2.60 in after hours trading

View attachment 715558

Yes...

Optimistically, the boat is sinking slower.

Rational/Pessimist, the boat is still sinking.

 

[MisterPenguin]

HotStar has always been nonsense empty subscriber numbers, in an emerging market. But seeing how low the ARPU is going versus the sporting rights costs they needed to keep them, it just doesn't make sense.

The whole panic attack over the subscriber loss this quarter is primarily India driven.

It's too bad, but the market just doesn't seem to be proving viable for them yet. This puts off a park there probably for a few more decades.

The stock market is being so fickle though. Despite the loses dramatically improving from Q4 22, all it seems to care about again is subscriber numbers.

Over 5 million people in India dropped D+ because Disney didn't spend hundreds of million to secure Cricket rights.

The ARPU (Average Revenue Per User) of D+ (Hotstar) subscribers in India is 60 cents. That's right, $0.59 per subscriber.

No wonder Bob and Christine signaled that India is going to be written off.

And now Wall Street, which has declared they don't care about subs, but only profits, sees that D+ losses have significantly declined and are truly on the way to being profitable, decide to go ahead and tank DIS stock because: They're looking only at the subs.

Not enough eye rolls are available in this universe.

 

[MisterPenguin]

Yes...

Optimistically, the boat is sinking slower.

Rational/Pessimist, the boat is still sinking.

Strategist: They're now bailing out more water than what's leaking in, and likely to continue that trend.

 

[BrianLo]

Is there an analogy where the market would be happy about a company losing 4 million customers?

I can't think of one, but I'm open to suggestions.

Admittedly, my understanding of free market economics is happily stuck in the 20th century and I have NEVER understood how streaming makes any real money for any studio, so maybe there's some trendy new business strategy that says it's good to lose 4 million paying customers in one quarter?

But apparently the American free market still works the same today as it did for the previous 275 years. When you lose a bunch of paying customers, that's still considered bad by the market and your stock decreases.

They lost 4.7 million subscribers in India whom pay a little over 50 cents a month. Obviously it's not a good thing, but they offset by gaining more international subscribers paying almost 6 dollars a month. It's the obsession Wall Street seems to have with the top line number and not the actual subscribers that pay money.

As you say, it doesn't make sense because they (Wall Street) seemingly send mixed messages that they are happier when they give away the service for free as opposed to actually making more money (which they did).

 

[Slpy3270]

I wonder what the pulled content will be. Licensed third-party titles? Short-lived shows? Originals that never did well? hope it's not a scenario where content is pulled permanently (impairment charges don't necessarily mean permanently pulled a la WBD; maybe they'll licensed pulled content to other outlets or put them out on video?).