Could it be the Gina Carano effect?
In a second quarter earnings call, Disney CEO Bob Chapek revealed that earnings came in stronger than anticipated for the fiscal period that ended on April 3, with most divisions, including theme parks, outperforming expectations. Yet despite this good news, the stock tumbled more than 4% in after-hours trading on Thursday.
Why? Because one key sector underperformed forecasts by an alarming degree: Disney+’s subscription rate.
Chapek announced that the service currently claims 103.6 million paid subscribers. Given that the platform had already crossed the 100 million mark by March, analysts had expected that number to be closer to 109 million.
Chief Financial Officer Christine McCarthy said that estimate was always overly optimistic and stressed that the company hit its internal goal of 100 million subscribers for the period. “We reached that milestone in early March, so we added subs at a faster pace in the last month of the second quarter than we did in the first two months,” McCarthy told investors, adding, “and that was despite no major market launches, a price increase in [Europe, the Middle East, and Africa], and a domestic price increase per the end of the quarter.”
But Disney’s current trading price suggests Wall Street isn’t buying the spin.
The streaming service’s numbers look particularly bad considering it costs much less than its competitors. Disney+ charges $7.99 a month compared to Netflix’s $13.99 and HBO Max’s $14.99 for a plan with equivalent features. Investors are also likely factoring that this period saw the launch of the first two series in Disney’s massive Marvel brand — “WandaVision” and “Falcon and the Winter Soldier” — and then failed to draw a significant number of new viewers.
Financial news outlets like Market Watch and Investor’s Business Daily aren’t tying the lower-than-expected subscription rate to the company’s decision to fire popular “Mandalorian” actress Gina Carano in February for her conservative views. But they offer little explanation for why the service underperformed forecasts so significantly for the last quarter.
Back in January, Disney+ looked set to become a subscription juggernaut, with “The Mandalorian” handing the platform its first major win over giant Netflix when it overtook “The Office” as streaming’s top-viewed series. But that was before Carano’s ouster sent #CancelDisneyPlus trending on Twitter and other social media platforms.
The strong fan reaction reportedly took Chapek by surprise — so much so, he addressed the matter during a shareholder’s meeting in early March. Asked if Disney plans to employ a “black list” to punish conservative performers, the CEO insisted the company isn’t Right-leaning or Left-leaning but stands for the “universal values of respect, values of decency, values of integrity, and values of inclusion.”
It also probably didn’t help matters that Disney was hit with another political scandal just before the second quarter earnings call when insiders leaked the company’s antiracism training program to journalist Christopher Rufo.
It would be hard to overestimate just how crucial a role the Walt Disney Co. expects Disney+ to play in its future profitability, but a research note analysts MoffettNathanson sent to Fast Company on Friday summarizes the situation well: “Previous [key performance indicators] that would swing the stock in years past like ESPN-affiliate fees, domestic-park profitability or global box office are accidental details in a market that is laser focused on Disney’s direct-to-consumer pivot,” the financial firm stated.
The future of Disney’s success depends on Disney+’s success. So they might want to give the next conservative actress a break.
The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.