Disney’s quarterly results show the path to signing up 2.5 billion subscribers: international expansion. But rapid growth in outside the U.S. isn’t certain to be lucrative.

In markets such as India, where Disney+ operates as a Disney+ Hotstar, subscribers pay an average of 76 cents (about 60 rupees) per month. In the US, pay an average of $6.32 (approximately Rs 500).

Disney+ had 138 million subscribers at the end of March, up 7.9 million from the previous quarter. A Disney source said the service will launch in 42 countries this summer and its global coverage to 106 countries.

It will produce around 500 shows in local languages ​​around the world, including 100 from India, to attract subscribers in these markets.

But more than half of its quarterly subscriber growth came from Disney+ Hotstar in India, fueled by the new season’s Twenty20 cricket tournament, the Indian Premier League. Disney+ Hotstar – available in four Asian markets outside India – now has more than 50.1 million paying subscribers.

Its shares fell as much as 5.5 percent to a two-year low of $99.47 (about 7,700 rupees) in early trade on Thursday, after six cut their price targets on the stock.

Disney’s streaming earnings topped Wall Street estimates for the Disney+ video service, thanks to hit new shows like Pixar’s “Go Red” and Marvel’s “Go Red.” moon knightbut rising programming and production costs have left some investors and unimpressed.

“The market is now concerned that subscriber guidance and rising costs to compete more broadly with non-Disney brands will result in a less impressive business at steady state,” said Michael Nathanson, an analyst at MoffettNathanson.

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Disney CFO Christine McCarthy commented that Disney+’s second-half subscriber growth may not be significantly higher than first-half earnings “probably a major concern for investors,” Bank of America analyst Jay Jessica Reif Ehrlich points out.

But Disney CEO Bob Chapek said Disney+ is on track to hit the company’s projected target of 230 million to 260 million subscribers by September 2024.

Operating losses at the company’s streaming business, which also includes ESPN+ and Hulu, rose to $877 million (about Rs 6,800 crore) in the quarter, triple the loss a year earlier, reflecting higher programming and production expenses.

Program spending in the third quarter is expected to rise by more than $900 million (approximately Rs 7,000 crore) as the company ramps up investments in original content and sports rights.

“We believe great content will drive our subscriptions, and those massive subscriptions will drive our profitability,” Chapek said on an investor call. “So we think they’re not necessarily opposites. We think they’re consistent with the overall approach we’ve developed.”

PP Foresight analyst Paolo Pescatore predicts that Disney+ will continue to grow as it expands into new markets and offers enticing streaming content such as the Oscar-winning animated film Encanto. But it may not be a financial success.

“It’s clear that all providers are too focused on net additions,” Pescatore said. “Unfortunately, given the nature of streaming, churn is high, and that’s going to impact all providers. That in turn impacts revenue and the bottom line. “

© Thomson Reuters 2022

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