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Disney misses in Q4, streaming growth decelerates

Disney missed earnings on Wednesday after falling short on subscriber growth. Yahoo Finance's Brian Sozzi has the details.

Video transcript

- Let's move it on to Disney here. Its bet on the future has been, of course, Disney Plus and streaming. And the promise of Disney Plus getting a little bit tarnished as it nears its two year anniversary. Disney Plus subscribers of 2.1 million to an overall subscriber base of 118.1 million last quarter. That is short of estimates which range here.

But anyway, [INAUDIBLE] it was short of estimates and also sharply lower than the growth of 12 million subscribers in the prior quarter, the smallest gain since Disney Plus was launched. So that's really the number that is getting the most attention. But the other numbers aren't very good either. Earnings per share missing estimates, sales missing estimates, that direct-to-consumer business, which includes Disney Plus, had a loss that was wider than estimates, the traditional TV business saw profit down 11%, theme park profit was lower than estimates. I'm hard-pressed to find, really, anything super strong in this report, Emily.

- Absolutely, Julie. And I think investors are definitely agreeing with that take as well here since we do see this stock, of course, being punished after these results. But I think here perhaps the one benefit or the one positive that you could see is, you know, Disney didn't necessarily come out here and raise its outlook, but at least it didn't lower it either when you think about its Disney Plus streaming growth prospects.

CEO Bob Chapek came out on their earnings call yesterday and reiterated the goal of having as many as 260 million customers by 2024. That's a benchmark that the company has previously come out and targeted. But when you have the company missing expectations here, it is at least a little bit of a positive that they expect to make up some of this deceleration in the coming quarters or at least in the coming years and actually still hit that benchmark by 2024. But then the other thing that I'll mention here with Disney is they did give some indication that they were going to see this magnitude of deceleration back in September.

Now, there was a Goldman Sachs conference where Bob Chapek had said that he expected just low single digit million ads in Disney Plus. That is what the company ultimately posted here for this fiscal fourth quarter, with about two million net subscriber additions. But it is interesting to see that the company still missed Wall Street's expectations, which had been looking for still low single digits, but a little bit higher than what Disney had actually delivered for this quarter.

- Yeah, you know it's a challenging quarter when Disney digs up Bob Chapek and puts him on a smaller competing network to try to pump up investor expectations as happened last night. But nonetheless, I didn't like this quarter, and the market clearly doesn't like this quarter either. Look at the direct-to-consumer business for this company.

Lost $630 million on an operating income basis. Street was looking for a loss of $570 million. Bottom line, Disney is spending now even more on content than the market expected as it does battle with the likes of Netflix.

Secondarily, Chapek I don't think did a good sales job on the earnings call last night, convincing the Street that subscriber growth and Disney Plus will accelerate over the next 12 months. I know he made the case that they will be launching in more countries. They have more content coming down the pike. The market could care less. I mean, he's going to have to show the Street that he can, in fact, do this. Right now, they don't believe him.

- I mean, they need vastly more content. I think it's safe to say, you guys. Because if you look at the slate of content versus something like in Netflix-- and you can argue there's a lot of [? dreck ?] on Netflix and there's a lot of stuff where it just doesn't get a lot of eyeballs, but that strategy has worked for Netflix that they just put a lot out there. Disney has seemed to be much more targeted with its releases and the content that it crafts, which works fine if you already are a fan of all that stuff. But is it going to bring newer people in?

- True. Where's the "Squid Game"? Where's Disney's "Squid Game"?

- Right. Exactly, exactly.

- You know, the fact is, why is Netflix keep coming out with these things? You know, Disney needs, I think, to step out of its boundaries. If they want to grow subscribers and hit the zeitgeist and get people excited about this, they have to take more chances, and they're not doing it.

- Yeah. I think that's-- that's exactly my point here. I mean, I'm excited about the Peter Jackson Beatles documentary, but I'm already a Disney Plus subscriber [INAUDIBLE].

- I'll sleep on that. Hold on. Hold on.

- That's-- wow.

[LAUGHTER]

- Come on.

- I don't even--

- That's not a "Squid Game." That's not a "Squid Game."

- No, it's not a "Squid Game," but come on, fall asleep? Give me a break.

- Wake me up later. Bye-bye. Got to go.

- Wow. I don't think we can be friends anymore, [INAUDIBLE]. All right.