Disney Gets Desperate

By Douglas A. McIntyre Published Aug 10, 10:00AM EDT

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The most recent Walt Disney Co. (NYSE: DIS | DIS Price Prediction) quarterly report caused the company to be hit by a wall of bad press. The same was true at many media outlets about perennial CEO Bob Iger. To be fair, no one can fix Disney in its current form. There was broad speculation that Disney would sell off major assets or break itself into more than one corporation.
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Iger said Disney’s streaming businesses would transform the company when Disney+ was launched in late 2019. He was right, except the transformation has nearly crippled it. The New York Times pointed out that Disney has lost $11 billion in the streaming business since its inception. In the most recently reported quarter, the division lost $512 million.
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Disney’s total revenue for the quarter was $22.3 billion, up 4%. The company’s loss from continuing operations was a $406 million loss, compared to a profit of $1.4 billion the year before. Disney’s theme parks carried the company on its back. Revenue for the segment rose 13% to $8.3 billion. Its operating income rose 11% to $2.4 billion.

Disney+ lost 11 million subscribers during the quarter to 141.6 million. Much of the loss was due to its troubled business in India. Nevertheless, it is still well behind rival Netflix, which has a subscriber total of 238 million. Amazon’s streaming business has nearly as many as Netflix’s.
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Iger’s answer to Disney’s streaming problems is to raise prices. The ad-free version of Disney+ will have its monthly subscription price move up to $13.99. That is from $10.99. And that is up from $7.99 less than a year ago.
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Iger’s decision about subscriber price is a long shot. The average American household has 2.8 streaming services, according to Forbes. At some point, a household streaming budget will be enough of a burden that people will be more selective. Raising prices drives churn. As a service loses subscribers, it has to replace them. Will people pay for a Disney+ as its prices balloon? The company is about to find out and may not get the answer it wants.

Iger has run out of cards to play. Sharp price increases for streaming services are not going to solve that problem.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.