Thomas Lyons 
Walt Disney, the renowned media and entertainment company, experienced a sharp decline in its shares by more than 8% following a surprise drop in streaming subscribers. This decline has raised concerns that the company’s success in reducing losses may come at the cost of growth. At least 10 analysts have lowered their price targets on the stock, and the decline is expected to erase approximately €13.7bn from the company’s market value. The shares of Warner Bros Discovery and Paramount Global, the company’s rivals, also fell by over 2%.
According to Mike Proulx, an analyst at Forrester, Disney+ is losing less money not because it is gaining subscribers, but because of its price hikes and better cost management. Proulx further stated that cutting marketing dollars is at odds with growing subscribers. The streaming unit’s operating losses narrowed by $400m in the second quarter from the previous three months, thanks to a price hike last December in the US and Canada. The company intends to raise the price of the ad-free Disney+ service again this year and remove certain low-viewership content from its services to lower costs.
Brandon Nispel, an analyst at KeyBanc Capital Markets, said that some investors might question this tactic, given that Disney just lost subscribers. However, he believes that the goal is to drive more subscribers towards Disney’s ad-supported tier, which the company believes could improve monetisation. In the second quarter, the Disney+ service lost about 4 million subscribers, compared with estimates for net additions of 1.3 million, according to Visible Alpha.
Veteran media analyst Michael Nathanson said that many investors will focus on the lack of direct-to-consumer subscriber growth. However, he believes that investors would be better off with a smaller total addressable market of higher-paying customers. Nathanson further stated that this is a more logical, albeit less sexy, path. The decline in subscribers has raised concerns about the company’s future growth, and analysts are keeping a close eye on how Disney will address this issue.
In conclusion, the decline in Disney’s shares is a cause for concern for the company and its investors. The drop in streaming subscribers has raised questions about the company’s future growth and its strategy for attracting new customers. While some analysts believe that the company’s focus on higher-paying customers is a more logical path, others are concerned about the decline in subscribers and the impact it may have on the company’s overall performance. It remains to be seen how Disney will address this issue and whether it will be successful in attracting new customers to its streaming services.
