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Disney stock pops on Q3 earnings as subscribers surge to 14.4 million

Yahoo Finance reporter Allie Canal details Disney's latest earnings report, and how the company plans to raise its streaming prices.

Video transcript

- We got to talk about this big name on the day, the House of Mouse. For those looking for signs of a recession, don't look at Disney and Disneyland, particularly. Disney stock, that is moving this morning after the company saw a 73% surge in its theme park revenue year over year and smashed expectations for its subscriber numbers on the Disney+ side. So Yahoo Finance's, Allie Canal, is here to break it all down for us. Ali, what stuck out to you in this earnings?

- I mean, now we have Disney surpassing Netflix when it comes to those total subs, Disney now well over 221 million subscribers across ESPN, Hulu, and, of course, Disney+. Now for the quarter, Disney+ jumped 14.4 million, which is just so significant considering where some of these competitors have landed.

Netflix lost a million subscribers, Peacock didn't add any subscribers. So it's interesting to see how each streaming service is telling a different story, right? About the streaming wars right now. Disney+. only two-and-a-half-years-old, a really incredible feat. But I do want to mention that Disney did lower its 2024 subscriber guidance for Disney+ that was initially set between 230 and 260 million subs. Now, they expect 215 to 245.

Now this could be due to a variety of reasons. The subscriber slowdown, the fact that they lost the streaming rights to the Indian Premier League, which is a big driver for their Disney+ Hotstar brand. That could be a trigger effect. And despite all of that, though, they did say that they expected the streaming business to still be profitable by 2024. And that's going to be pretty significant to accomplish, considering there was a $1.1 billion loss across all three of those streaming services.

So one thing that we saw them announce yesterday was price hikes. So the Disney+ ad-free version, that's going up by 38%, $7.99. It will now cost $3 more, $10.99. And we got word that their ad-supported version, that's coming out December 8 and will cost $7.99, so what people are paying now. So that's just a little bit of what Disney is doing to try and get to that profitability.

- Ali, have to give you a shot. You came on here yesterday with your Disney preview. You said, look, watch that longer term subscriber guidance for Disney+, it might come down, it did, hat tip to you. But what did not come down is the parks business, this was a blowout quarter in the parks business. And you got on that conference call last night with Bob Chapek and you got the sense, where is the recession? People are in these parks spending like gangbusters.

- Oh, it's insane. I mean, if you just look at the numbers here. For the parks business for the quarter, $7.39 billion versus the expected $6.65 billion. And Disneyland Shanghai was only open three days in the quarter because of COVID restrictions in China. So it's pretty insane to see some of these numbers.

Now, I will say that I think in the quarters to come if there's a worsening economy, if there's a recession, perhaps that would lead to a dip in that revenue for the park-side of the business. But right now, it seems like spring travel was alive and well, international travelers returning, and I think we're going to just see that throughout the summer too.

- By and large, I think we can say the second quarter was a sign that the streaming bubble, it blew up. Roku, bad quarter. Netflix, bad quarter. Warner Brothers, Discovery, trying to figure out what they're doing in streaming. But here's Disney putting up a very good quarter in streaming. What is it about it? Is it the content? Is that why they're winning?

- We had an analyst on the afternoon shows yesterday, and he was saying content is king, they do have a pretty robust slate of content through the end of the year. We saw the premiere of "Obi-Wan Kenobi," that could have been a big driver in the second quarter. But they need to make sure that they're keeping their franchises fresh. They have Marvel, they have "Star Wars," but we have seen a little bit of superhero fatigue. There was a "Morning Consult" poll that said people are kind of getting-- they're not hating on superhero movies so much.

- Well, I'm bullish on "She-Hulk." I'm excited for "She-Hulk." I love me some "She-Hulk."

- I understand though. It seems like every day we have a new Marvel movie, a new Marvel TV show. And I get it because they are a huge audience driver, but they have to make sure they're keeping it fresh, keeping people interested, and pulling people in that maybe aren't the biggest Marvel or superhero fans. How do you cater to that demographic as well?

- And "Black Panther Wakanda Forever."

- That's coming out in November.

- You got the trailer. "Avatar 2." So I mean, look, leaning further into the two huge acquisitions that this company has made, perhaps the most beneficial acquisitions or biggest return on investment that they will continue to see is the Lucas Film Productions, and then additionally on the Marvel side, the MCU continues to just give them a ton of fanfare, both in merchandise, both in content.

And then even in the parks experience too, we still have yet to see what more they're going to unveil there. But I thought it was something interesting that they did bring up with the pricing that they have and the strategy there. They said on the call that they've got some flexibility with levers that they can adjust if demand were to shift. What did you take away from that perspective specifically and what could we expect from them if demand does soften from Disney?

- I think they've proven that they can be flexible, but they have the pricing power to make it happen. I mean 14.4 million subscribers, people are already spending $7.99. Maybe they will upgrade to that three $3 to the common person. If they love Disney, if you have kids and you want to have those shows and have access to that, why not spend a few extra bucks?

But I think the key here is that Disney is going to be flexible. And I thought it was interesting on the earnings call too that Christine McCarthy, she said that 2/3 of Hulu subscribers are subscribed to that ad-supported version. So she does expect the ad-supported version for Disney+ to be successful.

Another interesting note is that she said that ad frequency on Disney+ is going to be less than Hulu, which I also think is a really good point. Because I have the Hulu ad-supported version. And I kind of get annoyed at all the ads that I see on Hulu, so it's a little less on Disney+, I think that'll benefit them in the long.

- They can put "She-Hulk." I'm still watching "She-Hulk."

- Bullish on "She-Hulk," Brian.

- And then he's going to get the fast pass to go on the "She-Hulk" ride.

- Whatever "She-Hulk" is doing, I'm all-in.

- Yahoo Finance's Disney trip. We got to do it honor of earnings. Let's do it.

- Put that on the corporate card. Allie Canal, great stuff. Good to see you.