Disney+ lost some subscribers in the last quarter of 2022 but the slight decline was attributable to Hotstar subscriptions. The bigger worry may be that the rate of growth in the United States and other international markets has also slowed. The direct-to-consumer business lost over a billion dollars in three months and $4.6 billion in a year, with a cumulative operating loss of $9.67 billion since launch. Disney will cut 7,000 jobs and costs by $5.5 billion in a bid to make the online business profitable.
Disney+ ended 2022 with 161.8 million online video subscribers, down from 164.2 million the previous quarter. It had 46.6 million subscribers in the United States and Canada, with 57.7 million internationally excluding Hotstar. Both were up by just 200,000 in the last quarter.
The 57.5 million Disney+ Hotstar subscribers brought in an average revenue of just 74 cents a month, although that was up 28% on the previous quarter.
Average monthly revenue was marginally down elsewhere, to $5.95 in the United States and Canada and $5.62 elsewhere excluding Hotstar. This was driven by a higher mix of subscribers to multi-product offerings, partially offset by an increase in retail pricing, with international revenue reduced by foreign exchange rates.
There was a 2% gain in ESPN+ subscriptions, to 24.9 million, and Hulu with a total of 48.0 million, of which 4 million are for the multichannel live television offering.
The direct-to-consumer businesses brought in $5.31 billion in revenue but recorded a quarterly loss of $1.05 billion. That was better than the $1.5 billion loss the previous quarter but in 2022 Disney lost a total of $4.6 billion on its online video operations.
Revenue from linear networks was $7.29 billion, of which $1.23 billion was from international channels, down by 21% on the same quarter the previous year.
Overall, Disney reported quarter revenues up 8% year on year at $23.51 billion, but free cash flow was down 81% at negative $2.16 billion.
Disney is now aiming to make $5.5 billion in cost savings, targeting $3 billion savings in content and $2.5 billion in operating costs, including a 30% reduction in labour and a 50% reduction in marketing.
Bob Iger, returning to Disney as chief executive in November 2022 to replace Bob Chapek, described the launch of Disney+ as “one of the most successful rollouts in the history of the media business”. He told analysts: “Now, it’s time for another transformation, one that rationalizes our enviable streaming business and puts it on a path to sustained growth and profitability”.
He said Disney+ will hit profitability by the end of 2024. “Since my return, I have drilled down into every facet of the streaming business to determine how to achieve both profitability and growth.”
That will include the loss of 7,000 jobs as part of $5.5 billion cost-saving programme. He signalled a greater focus on core brands and franchises, which have delivered higher returns. He also indicated that the company would use its legacy distribution platforms more for promotion and make greater use of these to amortise the cost of production.