FILE - In this Aug. 8, 2017, file photo, The Walt Disney Co. logo appears on a screen above the floor of the New York Stock Exchange. The Walt Disney Co. said Tuesday, Feb. 4, 2020, that profit fell 23% in its latest quarter to $2.13 billion as it absorbed losses, and a big revenue boost, from its new streaming service, Disney Plus. (AP Photo/Richard Drew, File)

Disney Plus streamer hits nearly 29M subscribers in 3 months

February 04, 2020 - 4:23 pm

NEW YORK (AP) — Disney said its Disney Plus streaming service reached nearly 29 million paid subscribers in less than three months, an impressive start for what the company has positioned as its future as more people drop cable subscriptions.

But as expected, starting up a new service comes with huge expenses, contributing to a 23% profit decline for the company in the latest quarter.

Disney Plus launched in November to compete with online video services like Netflix. Disney had 26.5 million Disney Plus subscribers as of Dec. 28, the end of its fiscal first quarter. That grew to 28.6 million as of Monday.

Original series on Disney Plus include the “Star Wars" series “The Mandalorian." One of the hit characters from the show is one resembling a baby version of Yoda. Disney CEO Bob Iger told analysts Tuesday that “Baby Yoda" consumer products will go on sale in the coming months. He said the “sensational response" to the character said a lot about Disney Plus.

The company also said a second season for “The Mandalorian" coming in October and said the priority for “Star Wars" going forward is through the streaming service. After 42 years, the franchise just concluded its nine-part core series with “Star Wars: The Rise of Skywalker." Disney has said the next “Star Wars” theatrical movie, which is to be set outside the Skywalker saga, isn't scheduled for release until 2022.

Disney also had 30.4 million Hulu customers and 6.6 million ESPN Plus subscribers as of Dec. 28, big gains for both from a year ago. Disney offers a bundle of the three streaming services.

Disney is targeting 60 million to 90 million Disney Plus subscribers by 2024. Disney expects growth in the near term to come primarily from outside the U.S., as the service launches over the next two years in Western Europe, India and Latin America. Disney also plans to roll out Hulu outside the U.S. next year after getting Disney Plus off the ground abroad.

The company has been turning to heavy promotions to boost Disney Plus in the early months. Disney, for example, struck a deal with Verizon to give some a free year. Disney said about 20% of its subscribers came that way. About half came directly through the Disney Plus website, and the rest from other channels. While the regular price for Disney Plus is $7 a month, average revenue from the service was just $5.56 for the quarter, Disney said.

Disney earned $2.13 billion in the latest quarter, or $1.17 per share. Adjusted for one-time items, earnings came to $1.53 per share. Analysts polled by FactSet expected earnings of $1.46. Revenue rose 36% to $20.9 billion. Wall Street expected revenue of $20.7 billion.

Disney shares rose 1.2% in after-hours trading to $146.50.

Revenue slid at Disney's cable networks division, by 20% to $4.8 billion. It said ESPN weighed on its profit because of higher programming and production costs and lower ad revenue as viewers decline.

The broadcasting arm's revenue rose 34% to $2.6 billion, while the parks division's sales rose 8% to $7.4 billion and the movie business more than doubled to $3.8 billion thanks to “Frozen II” and the new “Star Wars" movie in theaters.

The direct-to-consumer business that includes Disney Plus posted revenue of $4 billion, up from $918 million a year ago, while its operating loss widened to $693 million from $136 million.