• by Wayne Friedman , August 7, 2024

Walt Disney’s parks and experiences posted an underwhelming 2% improvement in revenues for its most recent quarterly earnings period -- with revenue landing at $8.4 billion.

This comes during what is usually a strong summer period for theme parks.

“Segment revenue growth was impacted by moderation of consumer demand towards the end of third quarter that exceeded our previous expectations,” according to the company.

Disney adds: “While results at domestic parks decreased modestly in the quarter [versus the first quarter 2023], attendance was comparable year over year and per capita spending was slightly up.”

Analysts say this was expected, to an extent. Laurent Yoon, media analyst for Bernstein Research, writes: “Parks’ near-term challenges are old news as well and no doubt that the overhang will persist. Despite the negative sentiment, we’re not concerned at the portfolio level for the experiences segment. [Still] the next few quarters could be bumpy.”

Disney's operating income for its parks/experience business fell 3% to $2.2 billion. Looking at the longer term, well into next year, Yoon says revenue growth is likely to be flat for its parks/experiences business.

Yoon says the company is identifying low-income families who are spending less on their parks visits, as well as high-income families now opting for a European vacation rather than a trip to Disney's domestic parks. 

At the same time, Disney’s said entertainment direct-to-consumer (D2C) platforms slipped back into posting a loss, due to the timing of a cricket streaming TV rights payment -- a net operating loss of $19 million. But when looking at all D2C platforms, including ESPN+, the businesses posted a net profit of $42 million -- a quarter earlier than expected. Overall revenues were up 15% to $5.8 billion. D2C advertising revenues grew 20% versus a 8% gain in the previous quarter.

Disney expects profitability to resume in the next quarterly period.

More significantly, average monthly revenue per user (ARPU) for Disney's D2C business slipped 3% (to $7.74), as subscribers shifted to cheaper ad-supported options from ad-free subscriptions.

On a positive note, Hulu witnessed its ARPU grow 8% (to $12.73) more, due to more impressions and a higher volume of ads.

Revenue at the D2C unit was higher due to subscription price increases for its streaming platforms. While advertising dollar volume also grew, it came amid lower price rates, for the cost per thousand viewers.

Disney+ U.S./Canada subscribers inched up 1% from the previous quarter to 54.8 million. International subscribers were flat at 63.5 million. Hulu grew 2% to 45.7 million. Hulu Live TV+SVOD slipped 2% to 4.4 million.

In other businesses, Disney’s linear TV networks continued to post declines with a 7% drop to $2.7 billion, along with a 6% fall in operating income, at $966 million.

Disney witnessed a decline in advertising due to lower overall viewer impressions and lower affiliate revenue because of “non-renewal” carriage network deals.

For ESPN, revenues were up 5% to $3.9 billion, with operating income 1% more to $1.1 billion. Program content sales slipped 4% to $2.1 billion, but posted $254 million in operating income -- a reversal from  a loss a year ago.

Overall, Disney's revenues were up 4% to $23.2 billion in the period, with income before taxes at $3.1 billion versus a loss a year ago.

Disney stock closed down 4.5% to $85.96 on Wednesday.

This story has been updated.