Disney vs. Netflix

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The magic has returned to Disney (DIS) as a vacationer surge back into parks led to a third-quarter earnings upside surprise. Shares climbed nearly 7% to $120 in post-market trading on Wednesday, with revenue for Disney Parks, Experiences and Products jumping 70% to $7.4B and operating income surging to $2.2B. Tech innovations like reservation systems played a role in the parks’ outperformance, while confidence appeared to return after a bruising few months triggered by the “Don’t Say Gay” tussle between Disney (DIS) and Florida’s legislature.

CEO Bob Chapek said all of the company’s theme parks are now open, and visits are strong, but cruise ships and international visitors have some recovery ahead. “Even while the average daily attendance at our domestic parks across the first three quarters of this fiscal year was slightly below 2019, we have delivered significantly higher revenue and operating income over that same time period,” added CFO Christine McCarthy. “This approach also provides flexibility with levers we can adjust if demand were to shift.”

Over in streaming, the House of Mouse beat estimates by tacking on another 14.4M users during the quarter for a total of 152.2M Disney+ subscribers (or 221M total streaming subs when factoring in ESPN+ and Hulu). At those numbers, Disney would have a larger base than its closest competitor Netflix (NFLX), though it continues to bleed cash. Disney’s streaming operation lost $1.1B during FQ3, more than triple its loss of $293M a year earlier.

Oh, boy! Growth expectations were cut after Disney failed to renew cricket rights for the popular Indian Premier League. Subscriber forecasts for 2024 now range between 215M-245M, down from 230M-260M, prompting the company to unveil a new U.S. pricing structure to make its streaming business profitable. Starting Dec. 8., Disney+ with commercials will cost $7.99 per month – which is currently the price of Disney+ without ads – while the monthly membership of ad-free Disney+ will rise 38% to $10.99.


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