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Disney+ Subs Fall Short of Latest Expectations

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(Image credit: Disney)

BURBANK, Calif.—Is Disney+ starting to hit a wall? In one of the first instances since the streaming service launched in November 2019, Disney+ failed to meet market expectations, announcing that it now has 103.6 million global subscribers; Wall Street projected it to be around 110 million at the end of the second fiscal quarter of 2021.

The Walt Disney Company shared the updated subscriber numbers as well as additional financial information from Q2 FY2021, which ended on April 3, in an official release on May 13.

To be fair, Disney+ has exceeded overall expectations at this point. Initial projections from Disney had the streaming service reaching 100 million global subscribers in 2025, but the company announced they reached that mark back in March. Subscribers just about tripled from the 33.5 million that were signed up at the end of Q2 FY2020.

As the world opens back up with the rollout of Covid-19 vaccines, that kind of growth is unlikely to be sustainable, and these most recent numbers may have already been impacted by a return to more normal habits.

Disney’s overall direct-to-consumer strategy, which includes Disney+, ESPN+ and Hulu, is proving profitable. Revenues from all DTC products came in at $4 billion, up 59% year-over-year, with an operating loss of $300 million (down $800 million). In terms of subscribers, ESPN+ added just under 6 million, a 75% increase from Q2 FY2020, and Hulu (for both its SVOD and Live TV services) added a little more than 9 million, a 30% increase.

Linear revenues, however, saw a dip year-over-year. Disney reports that its revenue from both its domestic and international channels was $6.7 billion, down 4% from Q2 FY 2020’s $7 billion. Looking specifically at domestic channels, which includes ESPN and ABC, that dipped from $5.6 billion in Q2 FY2020 to $5.4 billion in Q2 FY 2021.

However, these results was better than expected, according to Disney CFO Christine McCarthy.

“While we did see those specific adverse impacts play out, overall broadcasting results were higher than we expected, driven by lower marketing spend due to timing shifts of some new series in addition to a number of other smaller factors,” McCarthy told analysts in the company’s conference call after releasing results Thursday afternoon.

Operating income for domestic channels increased year-over-year to $2.3 billion (a 12% change). For cable channels, increases occurred because of lower programming and production costs and higher affiliate revenue. Contributing to this was the change in schedule for the College Football Playoffs, which had Disney only accounting for one game in Q2 FY2021 rather than four, and increases in contractual rates for affiliates.

For broadcasting, the increase was due to growth at ABC, again because of lower programming and production costs with the shifting of another major event (The Academy Awards) and higher affiliate revenue. There were, however, decreases at owned television stations as a result of lower advertising revenue from a decrease in political advertising and the timing of the Academy Awards.

For more information on Disney+’s Q2 FY2021 financial report, read the full release on Disney’s website