Shares of Walt Disney plummeted over 8% after a sudden decrease in streaming subscribers sparked fears that the media and entertainment titan’s success in containing losses at the business could be coming at the expense of progress. This was forecast to erase around $15 billion (€13.7bn) from the company’s market value, with no less than 10 analysts slashing their price targets on the stock. Rivals Warner Bros Discovery and Paramount Global also experienced a dip of over 2%.
Forrester analyst Mike Proulx commented that Disney+ is reducing losses not due to an increase in subscribers, but because of price hikes and better cost control. He added that cutting back on marketing dollars is counter-productive for gaining new subscribers. In the second quarter, operating deficits at the streaming unit dropped by $400m from the preceding three months, bolstered by a December price hike in the US and Canada.
Brandon Nispel from KeyBanc Capital Markets questioned if this tactic would be successful, given that Disney just lost subscribers. The plan is to direct more subscribers to Disney’s ad-supported tier, which may improve monetisation, he noted. Visible Alpha reported that Disney+ lost around 4 million subscribers in the second quarter, compared to estimations of net additions of 1.3 million.
Media expert Michael Nathanson remarked that many investors would focus on the lack of direct-to-consumer subscriber growth. He suggested, however, that investors would benefit more from a smaller target market with higher paying customers – a less attractive, yet more logical, path.
