MUMBAI: The Walt Disney Company CEO Bob Chapek, discussing the media behemoth’s latest earnings report, has asserted that while the Indian Premier League is “an important component” of its India business, “it’s not like we see that business evaporating if we don’t get (retain) it”.
It was also revealed during the conference call that the Disney+ Hotstar subscriber base has swelled to 45.9 million with the addition of 2.6 million subs in Q1.
Chapek, who was speaking at a conference call after Disney declared its Q1 2022 Results, stressed: “Sports for us are – it’s a very important strategic offering because the fandom and the passion is so deep. If you look at India, we’re certainly going to try to extend our rights on the IPL. But we’re very confident that even if we were not to go ahead and win that auction that we would still be able to achieve our 230 to 260 (million subscriber guidance for Disney+ by 2024). So it’s an important component for us around the world. Obviously really important in India, but not critical to us achieving the 230 to 260 number that we’ve guided to.”
Speaking on the importance of sports to Disney internationally, he noted: “The sports proposition internationally really varies by market. As you know, in Europe, it’s not a big component for us, but in Latin America, it actually is. And our – the way that we’ve gone to market in each territory, one of the differences between how we go to market in Asia versus how we go to market in Latin America versus how we go to market in Europe is a function of sports. That’s a really big piece of it.”
Kannan Venkateshwar, analyst from Barclays posed a pointed question to Chapek on the impact the loss of the IPL would have given that a significant portion of the total subscriber base for Disney DTC in India was due to cricket: “From a guidance perspective, I guess the other variable is just a breakeven guidance in 2024 for the streaming service. And you did talk about content spend being at least $8 billion to $9 billion in that year last quarter. So just given the growth in entertainment content locally around the world as well as some of the investments in sports in Latin America and potentially an increase in cost in India, could you just frame what kind of upside we could see to that content spend budget? Any framework in terms of how to think about it would be useful.”
Chapek downplayed the import of the question, essentially arguing that Disney+ Hotstar in India had much more to offer than just cricket. Chapek said: “So while the IPL obviously, is an important part of the Disney+ Hotstar content offering, it’s really one component of a broader portfolio of entertainment and sports. In addition to, obviously, the original content and the library content from Disney, Pixar, Marvel, Star Wars and Nat Geo, our Disney+ Hotstar offering does have a massive collection of local content, and we add over 18,000 hours of original programming every year. So while certainly it’s an important component, that local content that we’re developing really will mitigate the impact of us if we were not to win the auction on IPL. So an important component, but it’s not like we see that business evaporating if we don’t get it.
Disney CFO Christine McCarthy further said: “Kannan, on your question on the breakeven guidance and on Disney+ content spend. We’re not updating the guidance. We have that fiscal ’24 guidance out in the marketplace, and we’re sticking to it. We’re not yet at a steady state of content expense for Disney+, but we expect to have made significant progress by fiscal 2023.”
More ‘Chapekspeak’ from the conference call:
“Our adjusted EPS of $1.06 is up from $0.32 a year ago. Our Domestic Parks and Resorts achieved all-time revenue and operating income records despite the Omicron surge. And our streaming services ended Q1 with 196.4 million total subscriptions after adding 70.4 million in the quarter, including 11.8 million Disney+ subscribers.
“Sporting events continue to be the most powerful draw in television accounting for 95 of the 100 most watched live broadcast in 2021, and ESPN once again set the bar this quarter with live games across each of our 4 major U.S. sports, including the revolutionary Monday Night with Peyton and Eli. And I am pleased to announce that we have expanded our agreement with Peyton Manning and its Omaha Productions Company to extend our relationship through the 2024 NFL season, and we’ll add alternative presentations for UFC golf and college football events for each of the next 3 years.
“While multiplatform television and streaming will continue to be the foundation of sports coverage for the immediate future, we believe the opportunity for The Walt Disney Company goes well beyond these channels. It extends to sports betting, gaming and the metaverse. In fact, that’s what excites us, the opportunity to build a sports machine akin to our franchise flywheel that enables audiences to experience, connect with and become actively engaged with our favorite sporting events, stories, teams and players.
“As I’ve said before, we continue to manage our services for the long term and maintain confidence in our guidance of 230 million to 260 million total paid Disney+ subscribers globally by the end of fiscal 2024.
“Operating losses at Disney+ increased versus the prior year as growth in subscription revenue was more than offset by higher programming, technology and marketing costs. We ended the quarter with nearly 130 million global paid Disney+ subscribers, reflecting over 11 million net additions from Q4.
“Taking a look at subscriber growth by region. We added 4.1 million paid domestic Disney+ subscribers, including a benefit of approximately 2 million incremental subscribers from our strategic decision to include Disney+ and ESPN+ as part of a Hulu Live subscription. In international markets, excluding Disney+ Hotstar, we added 5.1 million paid subscribers, primarily driven by growth in Asia Pacific and European markets. I’ll note that growth in Asia included the benefit of new market launches in South Korea, Taiwan and Hong Kong in the quarter. Finally, we were able to resume growth in Disney+ Hotstar markets with 2.6 million paid subscriber additions in the quarter.
“At ESPN+, we ended the first quarter with over 21 million paid subscribers versus 17 million in Q4. Results decreased compared to the prior year as growth in subscription revenue was more than offset by higher sports programming costs driven by the NHL and LaLiga. And at Hulu, higher subscription revenues versus the prior year were partially offset by higher programming and production costs driven by increased affiliate fees for live TV. Hulu ended the first quarter with 45.3 million paid subscribers, inclusive of 4.3 million subscribers to our Hulu Live digital MVPD service.
“And so we’re bullish on the future of Disney+, both domestically and internationally, driven by not only additional prevalence of titles within our major franchises, but also general entertainment and specifically in the international territories local content.”
