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Disney streaming service sees subscribers fall again

2023-08-10 07:46
Disney on Wednesday reported a loss for the most recent quarter, with the number of subscribers to its streaming service shrinking again, but a pledge to crack down on password...
Disney streaming service sees subscribers fall again

Disney on Wednesday reported a loss for the most recent quarter, with the number of subscribers to its streaming service shrinking again, but a pledge to crack down on password sharing sent shares higher in after-market trades.

The falling Disney+ subscriber numbers -- for the third consecutive quarter -- came as a crippling writers and actors strike hits the US entertainment industry, threatening the company's ability to produce content key to the streaming service's appeal.

"It is my fervent hope that we quickly find solutions to the issues that have kept us apart these past few months," chief executive Bob Iger, whose contract has been extended through 2026, said of negotiations with striking actors and writers.

"I am personally committed to working to achieve this result."

Hollywood television and movie writers went on their first strike in 15 years in May, only to be joined in mid-July by actors.

The last time Hollywood writers laid down their pens and keyboards, in 2007, the strike lasted 100 days and cost Los Angeles's entertainment economy around $2 billion.

This time, the two sides are clashing as writers demand higher pay, minimum guarantees of stable employment and a greater share of profits from the boom in streaming, while studios say they must cut costs due to economic pressures.

The current double whammy of actors and writers is the first since the 1960s.

At issue for both labor groups in the age of streaming is better pay and residuals, and the role of artificial intelligence, which they fear the studios would like to use to replace them.

As things stand, neither the unions nor the Alliance of Motion Picture and Television Producers (AMPTP), the body that represents the studios, seems prepared to give ground.

- Password sharing a 'priority' -

Disney+ finished the quarter with 146.1 million subscribers, compared with just shy of 158 million in the first three months of this year, the group said.

All but a sliver of the loss in Disney+ subscribers took place in India, where the entertainment titan early this year lost rights to stream popular Premier League cricket matches.

Rival Netflix recently reported that its subscriptions climbed by nearly six million in the wake of its crackdown on password sharing.

Iger told financial analysts that Disney+ password sharing is "significant" and that the company plans to start tackling the situation.

"We already have the technical capability to monitor much of this," Iger said.

"We're going to get at this issue; we certainly have established this as a real priority."

Disney announced it will raise its streaming service subscription price in the United States to $14 monthly starting October 12, an increase of $3.

The company also expanded availability of an ad-supported Disney+ tier to Canada and parts of Europe.

Third Bridge analyst Jamie Lumley believes Disney+ has "a long road ahead" to becoming profitable.

"Our experts expect that 2025 is a more realistic timeline to achieve profitability than next year," Lumley said.

"Especially considering factors like the dual strike in Hollywood and relatively weak reception of Disney's content by audiences."

Disney shares were up more than 2 percent to $90 in after market trades despite the drop in streaming service subscriber numbers and a posted loss of $460 million in the quarter.

The unusual quarterly loss for the company was due to charges related to ending licensing agreements and yanking content from its streaming platforms.

Disney reported that its theme parks and cruise business continued to rebound from the pandemic, even while its traditional television offerings face a trend of ad dollars shifting to online viewing alternatives.

Iger said in the earnings call that streaming, film studios and theme parks will drive its growth in the coming five years.

"On the traditional TV side, losses continue to mount as CEO Bob Iger looks to offload what he now considers non-core assets, including the ABC Network," said Insider Intelligence principal analyst Paul Verna.

"These adverse trends are compounded by economic uncertainty, a soft ad market, increased competition in streaming media, labor disputes with screenwriters and actors, and lackluster box office numbers for Disney's films."

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