Walt Disney Co.’s crusade to become a streaming giant is off to a swift start.
Subscribers to the new Disney+ online service soared to 28.6 million by early February, suggesting the company founded nearly a century ago can challenge Netflix Inc. in the crowded market for online TV. Analysts were forecasting a year-end total of 20.8 million, according to the Bloomberg Consensus.
The surge marks an early success for Chief Executive Officer Bob Iger and his plan to reinvent the company. With three streaming services — Disney+, ESPN+ and Hulu — Iger has firmly steered Disney into on-demand viewing and away from conventional TV. But it’s coming at a cost: Disney said fiscal first-quarter profit fell — in part due to outlays for new online movies and TV shows.
Disney has seeded the new service with nearly all of its most-popular movies and TV programs, including “The Mandalorian,” a “Star Wars” spinoff featuring the cuddly character known as Baby Yoda. Hulu, the company’s streaming service for grownups, has reached 30.7 million customers, while ESPN+, its two-year-old sports service, has attracted 7.6 million subscribers. That’s up from 1.4 million a year ago.
“I am enormously proud of what we have accomplished in a relatively short period of time,” Iger said on a call with investors. “We are now well positioned to not only withstand the disruptive forces of technology, but thrive in today’s increasingly dynamic media environment.”
The streaming services continue to benefit from a US$13-a-month offer from Disney that includes all three products. Disney+ also has a promotional tie-in with Verizon Communications Inc.
About half of Disney+ subscribers were coming through the company’s website, Iger said, meaning distributors won’t get a share of the revenue. About 20 per cent came through the one-year free promotion with Verizon.
Disney shares fell as much as 2.2 per cent to US$141.51 in New York trading Wednesday. The stock is up almost 30 per cent in the past 12 months.
Burbank, California-based Disney said Tuesday that fiscal first-quarter earnings fell to US$1.53 a share, a number that beat analysts’ estimates of $1.46. Sales grew 36 per cent to $20.9 billion in the period ended Dec. 28, slightly exceeding estimates.
The drop in profit reflects costs from the company’s US$71 billion purchase of Fox’s entertainment assets last year, as well as the ongoing investment in movies and TV shows for streaming.