On Wednesday, shares of Disney, the largest media conglomerate, fell 13% to $86.75, the lowest figure since March 2020. The event could be considered as the biggest one-day drop since Sept. 17, 2001.
Losses at the company's Disney+ focused service division doubled in the latest quarter to $1.47 billion due to higher programming costs and expansion in its global streaming services market. Weakness in cable TV advertising revenue also affected Disney's performance.
Revenue, at $20.2 billion, was about $1 billion below analysts' forecasts. Profit fell to 30 cents per share, falling short of analysts' average estimate of 51 cents.
CEO Bob Chapek, who has been in the job for nearly three years, is at a turning point when the company's huge investment in streaming should pay off. Chapek reiterated his prediction that Disney + will be profitable in fiscal year 2024. He said that raising prices and introducing a new subscription version with added advertising would help the division reach that goal.
Chapek said that their financial results for this quarter represent a turning point as they hit peak streaming operating losses, which are expected to decline in the future.
The company exceeded expectations for streaming subscriber growth, signing up 12.1 million new customers on its flagship Disney+ service alone. Total subscribers, including those on Hulu and ESPN+ products, rose to nearly 236 million.
Disney has made streaming a major prospect. On Dec. 8, the company will begin selling an ad-supported version of Disney+ for a monthly price of $8. The price of an ad-free subscription will jump 38 percent to $11 a month. The company reported lower average revenue per Disney+ subscriber as more customers signed up for the discounted package. About 40 percent of Disney customers now use the bundled offer.
According to Third Bridge analyst Jamie Lumley, experts say the ads may have been more profitable for Disney+. However, Lumpy added that Disney is in a better position now than Netflix because of the existing advertising infrastructure on Hulu and ABC.
Disney theme park profits more than doubled to $1.51 billion because of higher attendance and increased guest spending, but it also fell short of analysts' forecasts.
Geetha Ranganathan, an analyst at Bloomberg Intelligence, said the parks' attendance figures were much lower than they expected.
Inflation may be holding back consumer demand. In this regard, Ranganathan said that such results no longer look so rosy.