Whether it’s Goofy’s or Mickey Mouse’s fault, but Disney’s plans for stepping into the Metaverse is met with a twist that will last until the second half of next year, for its Disney+ subscriber growth has slowed down. Disney+ is one of the one reasons why Disney is aiming to take its empire into the metaverse, as the way it sees it, it believes by doing so would help in the expansion of Disney+.
In its final quarter of its fiscal year, Walt Disney witnessed a jarring growth in its subscriber base for Disney+. Although CEO Bob Chapek had warned about low single digit growth, the number was still much less than expected. After receiving a growth of 9.2 percent and 8.6 percent in the previous quarters, Disney announced 118.1 million subscribers to its main streaming service, up 2.1 million, or 1.8 percent, over the prior quarter.
Factors that Stubbed the Growth
One of the main reasons being the block to its growth is due to the infamous coronavirus and its restrictions that made it tough on producing content to the point that executives had lost hope. The executives say that Disney may not reach its goal of fresh content every week from its core intellectual-property offerings until next summer. This will result in higher losses in the streaming sector next year, which was originally expected to be the year when that line began to improve.
Another factor that affected its growth is that, due to the lower pricing points for its Disney+ and Hotstar bundle in Indonesia and India, Disney's average revenue per subscriber has fallen in recent quarters. In other markets, the service's average monthly revenue per paying user is lower than classic Disney+, lowering the quarterly average.
Although Disney did release films such as Black Widow, Free Guy, and Shang-Chi and the Legend of the Ten Rings, and all did well at the box office. However, its content sales and licensing sector lost about $ 65 million in the quarter from increasing operations and marketing expenditures.
"The availability of film content to be sold in distribution windows following the theatrical release has been constrained due to fewer theatrical releases and development delays," the business noted.
"We don't expect sub growth to be linear from quarter to quarter. Taking all of this into account, as well as the timing of our planned international launches in 2022, we expect Disney+ subscriber net ads in the second half of fiscal 2022 to be significantly higher than the first half”, says McCarthy, Chief Financial Officer.
Its fiscal fourth-quarter financial results were lower than analysts had projected due to the dismal growth. Disney recorded a net income of $159 million, or 9 cents per share, in the fiscal fourth quarter, compared to a loss of 39 cents per share the year before. The company earned 37 cents per share after adjusting for restructuring charges, depletion, and other factors, compared to a loss of 20 cents per share a year before. From $14.71 billion a year earlier, revenue increased to $18.53 billion.
“In addition, we now expect Disney+ to reach its peak year of losses in fiscal 2022 rather than fiscal 2021, as higher-than-expected revenue and reduced content expenses due to production delays contributed to lower-than-expected losses in fiscal 2021”, adds McCarthy.
Hope from Long-Term Trends
Executives were optimistic about the long-term possibilities for Disney+ and the rest of the company's streaming activities, urging investors to look beyond quarter-to-quarter fluctuations.
“As we celebrate the two-year anniversary of Disney+, we're extremely pleased with the success of our streaming business”, says Chapek while announcing the results, "with 179 million total subscriptions across our DTC portfolio at the end of fiscal 2021 and 60 percent subscriber growth year-over-year for Disney+. We are committed to growing our DTC business over time, and we are sure that our high-quality entertainment and growth into new areas throughout the world will enable us to do so”.
Plans of Entering the Metaverse
"Suffice it to say, our efforts thus far are simply a prelude to a time when we'll be able to integrate the real and digital worlds even closer, allowing for narrative without limits in our own Disney metaverse”, says Chapek.
In fact, Chapek says that Disney is poised to take a technological leap into the digital realm and it believes that the metaverse could boost the growth of its Disney+ with a new kind of narrative.
Chapek says that they are excited to provide consumers with an unparalleled opportunity to experience everything Disney has to offer across all of our products and platforms, no matter where they are. Given its unique combination of brands, franchises, physical and digital experiences, and worldwide reach, it sees infinite possibilities in this new frontier, which could keep it as thrilled as ever about The Walt Disney Company's next 100 years.
On the other hand, Disney also believes that the metaverse could maintain the company's long tradition of technological innovation.
Last year, Tilak Mandadi, the company's former executive vice president of digital, posted his thoughts on LinkedIn on creating a theme park in the metaverse where ‘the actual and digital worlds meet’. Wearable devices, smartphones, and digital access points were believed to be used to do this. To put it another way, this could be the best of both worlds.
Now that COVID-19 lockdowns are easing up, Disney is witnessing a bounce back in its attendees at its theme parks.
For the first time since the pandemic began last quarter, the company's parks, experiences, and products segment generated positive operating income, and it improved on those results in the most recent quarter.
During the fiscal fourth quarter, all of Disney's global theme parks were open, and all of its cruise ships resumed sailing. The total income of the business unit, which comprises theme parks, hotels, and goods, increased by 26 percent to $5.45 billion. Disney said it spent $1 billion in fiscal year 2021 to comply with government requirements and improve safety measures for its employees and visitors.