Disney+ hits a speed bump and investors nail sell button

Disney’s fourth-quarter earnings missed Wall Street expectations Wednesday, as the company’s fast-growing streaming service, Disney+, hit a speed bump.

Shares of the Mouse House fell nearly 5 percent in after-hours trading on the news.

Disney+, which is known for hits like “Hamilton,” “The Mandalorian” and “Mulan,” struggled with fierce competition from rival streamers, as well the fact that consumers have other options for entertainment outside the home as COVID-19 vaccinations are on the rise.

The company said it added 2.1 million Disney+ subscribers, giving it a total of 118.1 million customers at the end of the fourth quarter. Analysts expected 126.2 million customers.

Although streaming subscriber growth has been slowing as the pandemic has waned, Netflix was able to ride the momentum of its megahit “Squid Game,” giving it 4.4 million new customers for the period for a total of 213.6 million global subscribers.

 In this photo illustration a close-up of a hand holding a TV remote control seen displayed in front of the Disney+ logo
Disney+’s quick growth slowed in the fourth quarter amid rising competition from rivals and an uptick in vaccinations.
LightRocket via Getty Images

Despite the slowdown in streaming, the global reopening has benefited Disney’s theme parks, experiences and products business, which includes Disney World and Disneyland.

The company said the division produced operating income for the first time since the pandemic began in the fiscal third quarter, and this unit was expected to remain profitable in the third quarter.

Overall, net income attributable to the company was $159 million, or 9 cents a share, compared with a loss of $710 million, or 39 cents per share, a year earlier.

Detail of the Disney streaming app on the screen of an Apple iPad Mini, taken on October 6, 2021.
Disney expects Disney+’s subscriber growth to ramp up in the second half of fiscal 2022.
Future Publishing/Getty Images

Even though the Burbank, Calif.-based company missed expectations, Disney CEO Bob Chapek lauded the improvements that the company has made since the pandemic took a stranglehold on its business.

Calling 2021 a “very productive year” for the company, Chapek said Disney has made “great strides in reopening” its businesses.

Despite a slowdown in Disney+’s subscriber growth, the CEO added: “We remain focused on managing our DTC [direct-to-consumer] business for the long term, not quarter to quarter.”

Disney expects Disney+’s subscriber growth to ramp up in the second half of fiscal 2022, as more original shows and movies will be added to the platform across its brands, including Disney, Marvel and Pixar.

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