Earnings Results: Disney to raise streaming prices while launching ad-supported tier, stock pops as subscriber total tops Netflix

“We had an excellent quarter, with our world-class creative and business teams powering outstanding performance at our domestic theme parks, big increases in live-sports viewership, and significant subscriber growth at our streaming services,” Disney Chief Executive Bob Chapek said in a statement announcing the results.

Shares of Disney initially moved more than 5% higher in after-hours trading as investors cheered strong, across-the-board results for Disney’s streaming, TV networks, and theme parks businesses.

Disney plans to launch an ad-supported Disney+ tier in the U.S. on Dec. 8, which will cost $7.99 a month, the same price Disney currently charges for the app with no ads; the non-ad version will increase to $10.99 a month, or $109.99 a year. Hulu’s ad-supported tier will cost $7.99 a month as of Oct. 10, with a premium subscription moving to $14.99 a month. Previously announced changes to ESPN+ pricing will go into effect on Aug. 23.

Disney will also continue to offer several bundles of its different streaming services. A bundle of Disney+ and Hulu with ads will cost $9.99 a month, for example, while adding ESPN+ with ads to that package moves it to $12.99 a month. A premium version of the bundle, which includes Disney+ and Hulu without ads and ESPN+ with ads, will cost $19.99 a month.

“With our new ad-supported Disney+ offering and an expanded lineup of plans across our entire streaming portfolio, we will be providing greater consumer choice at a variety of price points to cater to the diverse needs of our viewers and appeal to an even broader audience,” Disney executive Kareem Daniel said in a news release detailing the pricing changes.

Disney posted fiscal third-quarter net income of $1.41 billion, or 77 cents a share, on sales of $21.5 billion, up from $17.02 billion a year ago. After adjusting for restructuring costs, amortization and other effects, the company reported earnings of $1.09 a share, compared with adjusted earnings of 80 cents a share a year ago. Analysts surveyed by FactSet had expected adjusted earnings of 97 cents a share on revenue of $20.99 billion.

Disney’s performance in streaming comes at a time when inflation-weary consumers are scaling back on subscriptions and jumping from service to service, after an explosion in new Netflix streaming rivals from the likes of Apple Inc. 
AAPL,
+2.62%,
 Warner Bros. Discovery Inc. 
WBD,
,
 Comcast Corp. 
CMCSA,
+2.10%
 and Amazon.com Inc. 
AMZN,
+3.53%.
 Netflix reported a net loss of 970,000 paid subscribers in the second quarter, while analysts on average were forecasting a reduction of 2 million net additions. Warner Bros. Discovery reported a surprising second-quarter loss of $3.42 billion.

Disney’s largest business segment, media and entertainment distribution, compiled sales of $14.11 billion in the quarter, up from $12.68 billion a year ago; analysts on average predicted $14.2 billion. Direct-to-consumer sales, which includes streaming services as well as some international products, hauled in $5.06 billion, compared with analysts’ forecast of $5.17 billion on average.

Disney’s television networks generated sales of $7.19 billion, while analysts’ average estimates called for $7.05 billion. Content sales and licensing, a category that includes Disney’s film business, registered revenue of $2.11 billion vs. analysts’ expectations of $2.14 billion.

The company’s signature theme parks and product sales business increased to $7.39 billion in revenue from $4.34 billion a year ago. The average analyst estimate was $6.75 billion.

Disney’s stock has tumbled 27% so far this year but rebounded strongly of late. The S&P 500 Index 
SPX,
+2.13%
is down 12% and the Dow Jones Industrial Average 
DJIA,
+1.63%,
 which counts Disney as a component, is off 8%.