Walt Disney Co shares fell more than 8% on Thursday after an unexpected decrease in streaming subscribers sparked concerns about the company's growth potential. This decline wiped out approximately $16 billion in market value, marking the most significant single-day fall since Bob Iger returned as Disney CEO in November. Shares of Warner Bros Discovery and Paramount Global also fell over 3%.
Cost Management vs. Subscriber Growth
Mike Proulx, an analyst at Forrester, explained that Disney+ is losing less money due to price hikes and better cost management rather than gaining subscribers. He pointed out that cutting marketing dollars is different from growing subscribers. In the second quarter, operating losses at the streaming unit narrowed by $400 million, aided by price increases in the U.S. and Canada last December.
Disney+ to Raise Prices and Remove Content
Disney plans to increase the price of the ad-free Disney+ service again this year and remove certain low-viewership content to reduce costs. KeyBanc Capital Markets analyst Brandon Nispel questioned this tactic in light of recent subscriber losses but suggested the goal is to push more subscribers toward Disney+'s ad-supported tier to improve monetization.
Disney+ Hotstar Subscribers Exodus
In Q2, Disney+ lost around 4 million subscribers, compared to Visible Alpha estimates predicting net additions of 1.3 million. The losses were mainly due to subscribers leaving the South Asia-focused Disney+ Hotstar platform after it lost streaming rights to Indian Premier League cricket matches. These subscribers generate lower average revenue per user, making them less valuable to Disney.
Analysts Weigh In on Hotstar Losses
Paul Verna of Insider Intelligence noted that the Hotstar subscriber loss was unexpected, and growth outside India was sluggish. However, veteran media analyst Michael Nathanson argued that Disney could manage without Disney+ Hotstar subscribers, saying, "Investors would be better off with a smaller total addressable market of higher paying customers. This is a more logical, albeit less sexy, path."
