Disney, the world’s largest entertainment company, saw its shares drop to their lowest level in over three years on Wednesday, as investors turned bearish on its streaming prospects and growth potential.
Streaming slowdown
One of the main reasons for Disney’s stock decline was the disappointing performance of its streaming service, Disney+, which reported lower-than-expected subscriber growth in the third quarter of 2023. Disney+ added only 8.7 million subscribers in the quarter, missing analysts’ estimates of 12.4 million. The service now has 116.4 million subscribers worldwide, far behind its rival Netflix, which has over 200 million subscribers.
Disney blamed the slowdown on the impact of the COVID-19 pandemic, which delayed the production and release of new content for its streaming platform. The company also faced increased competition from other streaming services, such as HBO Max, Amazon Prime Video, and Apple TV+.
Disney’s CEO Bob Chapek said that the company was confident that it would reach its target of 230 to 260 million subscribers by 2024, as it planned to launch more original and exclusive content for Disney+, including Marvel and Star Wars series, animated films, and documentaries.
Growth challenges
Another factor that weighed on Disney’s stock price was the uncertainty over its future growth prospects, especially in its core segments of theme parks, movies, and merchandise. The company has been struggling to recover from the devastating effects of the pandemic, which forced it to close or limit the capacity of its parks, delay or cancel the release of its movies, and reduce its consumer products sales.
Disney’s theme parks division reported a loss of $1.1 billion in the third quarter, as it faced lower attendance and higher costs due to health and safety measures. The company said that it expected to face more challenges in the fourth quarter, as the Delta variant of the coronavirus caused a surge in cases and travel restrictions in some markets.
Disney’s movie division also suffered a setback in the third quarter, as it faced a legal dispute with Scarlett Johansson, the star of its blockbuster film Black Widow. Johansson sued Disney for breach of contract, claiming that the company’s decision to release the film simultaneously on Disney+ and in theaters reduced her potential earnings from box office revenue. The lawsuit sparked a controversy in Hollywood, as many actors and filmmakers expressed their support for Johansson and criticized Disney’s streaming strategy.
Disney’s merchandise division reported a modest increase in revenue in the third quarter, but it also faced some challenges, such as supply chain disruptions and lower demand for some products. The company said that it was working to improve its inventory management and product innovation, as well as to expand its e-commerce presence.
Outlook
Despite the negative sentiment surrounding Disney’s stock, some analysts and experts remained optimistic about the company’s long-term prospects. They argued that Disney had a strong brand value and loyal fan base, as well as a diverse portfolio of businesses and franchises that could generate consistent cash flow and growth opportunities.
They also pointed out that Disney had a competitive advantage in the streaming market, as it had a large library of content and intellectual property that could attract and retain subscribers. They expected that Disney would be able to overcome its current challenges and resume its growth trajectory once the pandemic situation improved and consumer behavior normalized.
