Disney bounces back with strong earning and streaming growth

The Walt Disney Co. has reported its strongest sales and profit since before the COVID-19 pandemic began. The company reported fiscal third-quarter net income of $918 million, or 50 cents a share, compared with a loss of $2.61 a share in the year-ago quarter. Revenue improved to $17.02 billion from $11.78 billion a year ago, a jump of 44.5%.

“We ended the third quarter in a strong position, and are pleased with the Company’s trajectory as we grow our businesses amidst the ongoing challenges of the pandemic,” said Bob Chapek, Chief Executive Officer, The Walt Disney Company. “We continue to introduce exciting new experiences at our parks and resorts worldwide, along with new guest-centric services, and our direct-to-consumer business is performing very well, with a total of nearly 174 million subscriptions across Disney+, ESPN+ and Hulu at the end of the quarter, and a host of new content coming to the platforms.”
Most of the focus during the COVID-19 pandemic has been on Disney’s streaming efforts. Disney+ subscribers increased to 116 million.

With Disney+ seeing a slower subscriber addition in the US, Disney+ Hotstar is turning out to be the saviour for the American media & entertainment conglomerate. For the third quarter ending June, Disney+ Hotstar comprised close to 40% of Disney+'s global subscriber base of 116 million. 

"We ended the third quarter with 116 million global paid subscribers to Disney+, up from approximately 104 million in the second quarter. Disney+ Hotstar accounted for the majority of our net subscriber additions between Q2 and Q3, making up a little less than 40% of our total Disney+ subscriber base as of the end of the third quarter. However, subscriber growth was also solid at our core Disney+ markets, excluding Disney+ Hotstar, with total quarter-over-quarter net adds in those markets consistent with net adds from Q2," Christine McCarthy, Senior Executive Vice President and Chief Financial Officer, Disney, told analysts during the Q3 earnings conference call.

She further stated that Disney+'s overall ARPU this quarter was $4.16. Excluding Disney+ Hotstar, the ARPU was $6.12 or an increase of about $0.50 versus the second quarter. The ARPU increase reflects a benefit from the recent price increases, both domestically and abroad.

"Disney+ Hotstar ARPU also increased from Q2 to Q3 due to higher ad revenue per subscriber, reflecting the roughly four weeks of IPL matches that were played in Q3 versus none in Q2," McCarthy said.

She also noted that results at international channels declined due to higher programming and production costs, partially offset by higher advertising revenue. "Both of these factors were impacted by the return of live sporting events and, in particular, the Indian Premier League, which held cricket matches from April 9 until the season was postponed on May 4 versus no matches in the prior-year quarter due to COVID-19."

While IPL is extremely important for Disney+ Hotstar, it is just one component of the streaming platform's content offerings. "When you think about Disney+ Hotstar, IPL is certainly a very, very important component of the offerings, but it's only one because we also have a very broad portfolio of general entertainment as well as other sports. It has a lot of original content -- library content in it from all of the Disney+ brands and IP. And we added over 18,000 of original local programming every year," she added.

McCarthy said Disney feels "really good about not only the IPL but also Star -- Hotstar+". Reiterating the previous guidance about Disney+ Hotstar, she said that the platform is anticipated to contribute between 30% and 40% of total Disney+ subscriber base. "We're not updating that guidance at this point," she stated.

During the quarter, Disney+ Hotstar was launched in Malaysia and Thailand in Q3.