Daily Brief: Disney Shows Netflix How It’s Done

Daily Brief: Disney Shows Netflix How It’s Done

over 1 year ago3 mins

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Disney announced late on Wednesday that it now has more subscribers than Netflix.

What does this mean?

Netflix hemorrhaged subscribers last quarter, losing 970,000 of them to the two-headed beast of rising inflation and increasing competition. But as tricky as this environment is, Disney proved that it’s still very possible to win customers over: its flagship streaming service, Disney+, added 14.4 million new subscribers last quarter. That’s far more than the near-10 million analysts were expecting, and brings its total to 152 million. Add in the firm’s Hulu and ESPN+ subscribers, and Disney now boasts 221 million members across its streaming platforms – putting it ahead of Netflix for the first time. It rounded things out with a theme park segment on magical form, and overall revenue came in 26% higher last quarter than the same time last year.

Disney subscribers
Source: The Wall Street Journal

Why should I care?

Zooming in: Profitability > growth.

There is one caveat, mind you: almost two-thirds of Disney+’s 14.4 million new subscribers were in India, where the average revenue per customer is a fraction of what it is elsewhere. That means its subscriber growth isn’t pulling as much weight as it should be, and might be why Disney is now prioritizing earning more from its existing users. There’s plenty of room for improvement on that front: its streaming business posted a loss of $1 billion last quarter – three times more than the same time last year.

Disney streaming loss
Source: Axios

The bigger picture: We’ll be right back after these messages.

Disney is taking a two-pronged approach to boosting its profitability: adding commercials and hiking prices. Starting in December, Disney+ subscribers will have to watch ads to keep paying $8 a month, or pay $3 more for an uninterrupted experience. This Sophie’s Choice is bound to put some viewers off, so it’s no coincidence that the company slashed its 2024 subscriber forecast by 15 million.

Keep reading for our next story...

Life Gives Honda Lemons

Honda image

Honda posted better-than-expected earnings earlier this week.

What does this mean?

Like other Japanese firms with big international sales, Honda is doing well out of a weaker yen that makes its overseas revenue worth more when it’s converted back. So even though it sold fewer cars last quarter than it did the same time last year, the company’s revenue still climbed by a better-than-expected 7%. And sure, Honda’s profit was 9% lower than it was the same time a year ago: it is, after all, contending with rising material costs, supply chain disruptions, persistent chip shortages, Chinese lockdowns – the list goes on. But analysts were expecting that profit to fall by twice as much, and Honda went on to bump up its full-year revenue and profit forecasts too. It even said it would buy back 100 billion yen ($741 million) worth of its own shares, which investors liked the sound of: they sent Honda’s shares 7% higher after the news.

Honda stock
Source: Google Finance

Why should I care?

For markets: Honda’s got 99 problems.

Still, Honda urged caution about the future, not least because it thinks the long-standing chip shortage will last until at least early 2023. The geopolitical tensions in the Taiwan Strait – a crucial shipping lane used to supply a big portion of the world’s chips – aren’t helping either, which is why Honda revealed that it had started to build up its chip stockpiles. But even if the carmaker solves that problem, new Chinese lockdowns and enforced energy rationing in Europe could be next.

The bigger picture: Speak no EVil.

Japanese carmakers are betting big on hybrid cars, but they’ve mostly been leaving fully electric vehicles by the wayside. Just 18% of Honda’s production, 14% of Toyota’s, and 22% of Nissan’s are expected to be pure battery EVs by 2029, according to IHS Markit. That pales in comparison to, say, Ford and Volkswagen, at 36% and 43% respectively.

Japanese automakers clean cars
Source: Bloomberg, InfluenceMap
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