(Reuters) -Disappointing growth of Walt Disney Co’s namesake streaming service on Thursday overshadowed better-than-expected overall profits, driving down shares of the entertainment company.
Shares of Disney fell 3.7% in after-hours trading.
CEO Robert Chapek said that movie and television shows were resuming normal production and new offerings would help bring in new customers to Disney+, ESPN+, Hulu and Hotstar.
Adjusted earnings-per-share for the fiscal second quarter came in at 79 cents for January through April 3, Disney said. Analysts had expected 27 cents, according to IBES data from Refinitiv.
Disney is focusing on quickly building its streaming service to challenge Netflix Inc as audiences move away from cable TV. The company’s popular theme parks remain in recovery mode with attendance limits due to the COVID-19 pandemic.
“(Disney+) growth is significantly decelerating as the initial pandemic boost has waned,” eMarketer analyst Eric Haggstrom said. “Given Disney’s content investments, subscriber growth should return strongly once this short-term turbulence ends.”
Upcoming Disney+ series include “Loki” about the Marvel villain and Star Wars series “The Book of Boba Fett.”
A total of 103.6 million customers subscribed to Disney+ as of early April, the company said. Two Marvel superhero series, “WandaVision” and “The Falcon and the Winter Soldier,” debuted during the quarter. Analysts had projected 109.3 million, according to FactSet.
The average monthly revenue per paid subscriber for Disney+ decreased from $5.63 to $3.99, the company said, due to the launch of the lower-priced Disney+ Hotstar in overseas markets. Factset estimates showed Wall Street was expecting average revenue of $4.10 per user.
Disney plans to launch Disney+ in Malaysia on June 1 and in Thailand on June 30, executives said on a call with analysts.
Overall revenue fell 13% to $15.61 billion in the second quarter ended April 3, a touch below what analysts estimated, according Refinitiv.
Net income from continuing operations rose to $912 million in the second quarter from $468 million a year earlier.
Operating income at Disney’s media division rose 74% from a year earlier to $2.9 billion as profit rose at domestic and international TV networks. The streaming media unit lost $290 million, less than half of what Wall Street expected, thanks in part to higher advertising revenue at Hulu and ESPN+ income from Ultimate Fighting Championship pay-per-view events.
The theme parks division posted an operating loss of $406 million. The Disneylands in California and Paris were closed for the full quarter. Disneyland in California reopened April 30.
Chief Financial Officer Christine McCarthy said reservations at Disney’s U.S. parks were strong, “demonstrating the strength of our brands as well as growing travel optimism.”
Chapek said Disney will continue to experiment with movie distribution while theaters try to lure audiences back. The company will offer late summer releases “Free Guy” and “Shang-Chi and the Legend of the 10 Rings” exclusively in theaters for 45 days, a shortened period that has been embraced by other studios to allow for home viewing sooner.
Disney renewed a deal with Major League Baseball with 30 exclusive regular season games through 2028. The deal includes an option to simulcast all live MLB coverage for ESPN networks on ESPN+.