LOS ANGELES — An adolescent sea monster, Marvel’s god of mischief and Cruella de Vil helped Disney’s flagship streaming service attract 12.4 million new subscribers between April and June, more than Wall Street had expected.
The Disney+ service ended the quarter with 116 million subscribers worldwide, the company reported on Thursday. Analysts had been hoping for 112 million to 115 million. The most popular offerings on Disney+ were “Luca,” an original Pixar film; the superhero series “Loki,” starring Tom Hiddleston; and the live-action movie “Cruella,” with Emma Stone taking over as the classic Disney villain.
The quarter, the third in Disney’s fiscal year, was notable for another reason: Disney Parks, Experiences and Products swung to a profit ($356 million) after four consecutive money-losing quarters ($3.6 billion in total). The availability of coronavirus vaccines prompted families to return in large numbers to Walt Disney World in Florida. Disneyland in California reopened on April 30 for the first time in 14 months, although state regulators initially limited capacity to 25 percent, a restriction that has since been lifted. (Masks are still required.)
Bob Chapek, Disney’s chief executive, told analysts on a conference call that theme park bookings remained “really strong” despite a new surge of coronavirus infections around the world, the result of the Delta variant. Christine M. McCarthy, Disney’s chief financial offer, added that spending on hotel rooms, merchandise and food had been “exceptionally strong.” Ms. McCarthy said that, unless the coronavirus situation changed, Disney planned to increase capacity at its theme park resorts for the coming holidays.
Disney is the world’s largest entertainment company, with operations that include the ABC broadcast network, ESPN, cruise vacations, stage musicals, book publishing and the Disney Store chain. But investor excitement about streaming has in some ways made Disney a one-business enterprise: At least for the time being, as Disney+ goes, so goes the entire company.
Disney+ surpassed its five-year subscriber goal in just its first nine months. The pandemic was one accelerant, as families looked for ways to entertain themselves at home. But growth slowed between January and March — Disney+ added 8.7 million subscribers in that period, and Wall Street had hoped for more than 14 million — prompting worries about streaming-service fatigue and leading to a slide in Disney shares.
The company’s stock price rose more than 5 percent in after-hours trading on Thursday.
Like other media companies, Disney has turned to streaming because cable television has conked out as a growth engine. Operating profit at Disney’s traditional TV business — ESPN, ABC, Disney Channel, FX, Freeform, National Geographic and other cable networks — totaled $2.2 billion in the quarter, a sharp 33 percent decline. Disney attributed the drop to higher programming costs, including the return of live sports on ESPN and the pandemic-delayed Academy Awards, which ran on ABC. Higher advertising revenue and cable subscriber fees only partly offset the rise in expenses.
Even so, traditional television remains a huge business for Disney, generating $6.96 billion in revenue in the quarter, an increase of 16 percent.
Disney logged $4.3 billion in total streaming revenue, up 57 percent from a year earlier. The monthly price for a Disney+ subscription in the United States rose $1 in late March, to $8. Disney+ also generated tens of millions of dollars from “Cruella,” which was made available to subscribers in May — at the same time the film arrived in theaters — for a $30 surcharge. Hulu, which Disney took over in 2019, benefited from higher advertising revenue and subscriber growth.
Disney said Hulu had about 42.8 million subscribers, a 21 percent increase from last year. About 15 million people pay for access to the company’s ESPN+ platform, up 75 percent from a year earlier.
But building a portfolio of streaming services is mighty expensive. A variety of costs (content production, marketing, technology infrastructure) contributed to losses of roughly $300 million for Disney’s streaming unit. Still, the division lost twice that amount in the same period a year ago.
Citing the pandemic, which has ravaged the movie theater business, Disney has recently changed its film distribution methods. Some films that were originally supposed to play in theaters — animated films, in particular — have been rerouted to Disney+ entirely. Others have been made available on Disney+ when they open in theaters, a practice that has put the company on war footing with at least one major star and her agents.
Scarlett Johansson, who has played the superassassin Black Widow in eight films, sued Disney this month, contending that making “Black Widow” available on Disney+ when it opened in theaters “dramatically” lowered box office revenue, which cost her tens of millions of dollars in bonus compensation. Her lawsuit drew a blistering “no merit whatsoever” response from Disney.
Mr. Chapek commented only indirectly on Thursday on Ms. Johansson’s complaint.
“Certainly this is a time of anxiety in the marketplace,” he said in response to an analyst question about Disney’s movie release strategy. “These films that we are releasing right now were imagined under a completely different environment than unfortunately fate has delivered us. But we’re trying to do the best thing for all our constituents and make sure that everybody who is in the value chain, if you will, feels like they’re having their contractual commitments honored both from a distribution and a compensation standpoint.”
The company will continue to decide “film by film” how movies will be released, Mr. Chapek said. “We value flexibility,” he said.
Profit in the quarter totaled $923 million, compared with a loss of $4.8 billion a year earlier, when the world was still in the throes of the prevaccine pandemic. Excluding one-time items, the company had per-share profit of 80 cents, up from 8 cents. (Analysts had expected about 56 cents.)
Revenue was $17 billion, a 45 percent increase from a year earlier. (Analysts had predicted $16.8 billion.)
Ms. McCarthy announced on the call with analysts that Disney would not restart dividend payments to investors “until we return to a more normalized operating environment.” Disney last paid its semiannual dividend in January 2020.
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