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 Shares of Disney were flat following the results after bouncing
between positive and negative territory.
The results showed Disney made a strong entrance into the
streaming video wars dominated by Netflix Inc. The owner of
sports powerhouse ESPN is trying to transform its business to
capture audiences that are moving online.
Analysts at three brokerages had expected more than 20 million
subscribers to Disney+, which is available in five countries
including the United States. Disney+ will be available in India
on March 29 through streaming service Hotstar.
Netflix, which began delivering online video 13 years ago,
boasts 67.7 million paid subscribers in the United States and
Canada.
Subscribers at Hulu, a streaming service Disney now controls,
climbed to 30.7 million as of Monday, the company said. ESPN+
customers reached 7.6 million this week.
"(I) believe we're now well positioned to not only withstand the
disruptive forces of technology but thrive in today's
increasingly dynamic media environment," Disney Chief Executive
Bob Iger said on a conference call.
Iger said 50% of Disney+ subscribers signed up directly with the
company and 20% came from its partnership with Verizon
Communications Inc. He said the service did not experience
significant cancellations after the end "The Mandalorian," a
"Star Wars" series that became a cultural phenomenon thanks to a
character commonly called Baby Yoda.
During an earnings call, Iger said that "The Mandalorian" will
return in October and will go beyond season two, "including the
possibility of infusing it with more characters and taking those
characters in their own direction in terms of series."
Selling Disney+ in a bundle with ESPN+ and Hulu helped lower
cancellation rates, Iger added.
Earnings for the quarter grew with help from healthy business at
Disney's theme parks and the strong performance of animated
movie "Frozen 2."
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Excluding certain items, Disney earned $1.53 per share, above the
average analyst estimate of $1.44, according to IBES data from
Refinitiv. Revenue rose to $20.9 billion, up 36% from a year
earlier.
The parks, experiences and products division posted operating income
of $2.3 billion, up 9% from the prior year.
Disney was forced to close both Shanghai Disney Resort and Hong Kong
Disneyland in late January during the busy Chinese New Year holiday
to help stop the spread of coronavirus.
The closings could shave $135 million off operating income at
Shanghai, and $40 million at Hong Kong, if they extend for two
months, Chief Financial Officer Christine McCarthy said.
The bulk of Disney's theme parks revenue comes from its U.S. parks.
Iger told CNBC that advance U.S. bookings had not been affected.
The Hong Kong park could see an additional $105 million decline in
operating income during the quarter, McCarthy said, as ongoing
anti-government protests have depressed tourism.
Disney's direct-to-consumer and international segment, the division
that is spending big to build the streaming business, reported an
operating loss of $693 million, below analyst expectations.
Operating income in Disney's media unit, home to ESPN, the Disney
Channels and ABC, rose 23% to $1.6 billion.
Profit more than tripled at the movie studio to $948 million.
(Reporting by Neha Malara in Bengaluru and Lisa Richwine in Culver
City, California; Editing by Sriraj Kalluvila and Lisa Shumaker)
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