May 11 (Portal) – Shares of Walt Disney Co (DIS.N) ended down more than 8% on Thursday as a surprise drop in streaming subscribers fueled fears that the media and entertainment company was at its Trying to stem losses could forego growth.
The drop removed about $16 billion from the company’s market value and marked the stock’s sharpest one-day fall since Bob Iger returned as Disney CEO in November. Warner Bros Discovery (WBD.O) and Paramount Global (PARA.O) shares fell more than 3%.
“Disney+ is losing less money, not because it’s adding new subscribers, but because of price increases and better cost management,” said Mike Proulx, an analyst at Forrester.
“Reducing marketing spend is at odds with growing subscribers.”
The streaming unit’s operating losses fell $400 million in the second quarter compared to the previous three months, helped by a price hike last December in the US and Canada.
The company plans to raise the price of the ad-free Disney+ service again this year, and will also remove certain low-viewing content from its services to lower costs.
“Some investors may question this tactic as Disney just lost subscribers,” said Brandon Nispel, an analyst at KeyBanc Capital Markets.
“However, the goal appears to be to attract more subscribers to the ad-supported tier of Disney+…which the company believes could improve monetization.”
HOTSTAR DRAG
In the second quarter, Disney+ lost about 4 million subscribers, while Visible Alpha expects a net gain of 1.3 million. The company said the weakness could continue into the current quarter.
The losses were caused by an exodus from the South Asia-focused Disney+ Hotstar offering after the company lost streaming rights to Indian Premier League cricket matches.
These subscribers are considered less valuable to Disney because they generate lower average revenue per user.
“Investors understand that Hotstar customers don’t generate as much revenue, but the loss was unexpected and growth outside of India was paltry,” Insider Intelligence’s Paul Verna said.
However, veteran media analyst Michael Nathanson said the company could do without Disney+ Hotstar subscribers.
“Investors would be better off with a smaller overall market of higher-paying customers. It’s a more logical, if less sexy, way.”
Reporting by Aditya Soni; Edited by Sriraj Kalluvila
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