Disney shares fall most since Iger’s return after streaming subscriber losses

Walt Disney Co shares ended down more than 8% on Thursday as a surprise drop in streaming subscribers fanned worries that the media and entertainment company could be sacrificing growth in its bid to stem losses.

The decline erased about $16 billion from the company’s market value and marked the stock’s sharpest single-day fall since Bob Iger’s return in November as Disney CEO. Shares of Warner Bros Discovery and Paramount Global fell more than 3%.

“Disney+ is losing less money not because it’s gaining subscribers but because of its price hikes and better cost management,” said Mike Proulx, an analyst at Forrester.

“Cutting marketing dollars is at odds with growing subscribers.”

Operating losses at the streaming unit narrowed by $400 million in the second quarter from the previous three months, helped by a price hike last December in the U.S. and Canada.

The company plans to raise the price of the ad-free Disney+ service again this year and it will also remove certain low-viewership content from its services to cut costs.

“Some investors might question this tactic given Disney just lost subscribers,” said KeyBanc Capital Markets analyst Brandon Nispel.

“However, it seems the goal is to drive more subscribers toward Disney+’s ad-supported tier … which the company believes could improve monetization.”

Hotstar Drag
In the second quarter, Disney+ shed about 4 million subscribers, compared with Visible Alpha estimates for net additions of 1.3 million. The company said the softness could extend into the current quarter.

The losses were driven by an exodus from the South Asia-focused Disney+ Hotstar offering after it lost the streaming rights to the Indian Premier League cricket matches.

Those subscribers are seen as less valuable to Disney as they generate lower average revenue per user.

“Investors understand that Hotstar customers don’t generate as much revenue but the loss was unexpected and growth outside of India was anemic,” said Paul Verna of Insider Intelligence.

Veteran media analyst Michael Nathanson, however, said the company could do without the Disney+ Hotstar subscribers.

“Investors would be better off with a smaller total addressable market of higher paying customers. This is a more logical, albeit less sexy, path.” US News