Disney needs a new story to tell, warns of softer streaming growth

An artist dressed as a Mickey Mouse entertains guests during the reopening of Disneyland theme park in Anaheim, California, USA on Friday, April 30, 2021.

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Disney it might have a storytelling problem.

Although the company added 7.9 million better-than-expected Disney + subscribers in the quarter, Disney stock slipped after closing time Wednesday when CFO Christine McCarthy acknowledged that the second half of the year may not be as strong as the first half.

“At Disney +, while we still expect a net increase in the second half of the year over the first half, it’s worth mentioning that we had a stronger-than-expected first half of the year,” McCarthy said. “The delta we originally predicted may not be that big.”

Disney added about 20 million Disney + subscribers in its first two fiscal quarters, which means new Disney + subscribers in the next two quarters will still be over 20 million, but maybe not by much. The company reiterated that Disney + subscribers are still expected to end between 230 million and 260 million by the end of 2024 and will reach profitability by that time.

On the surface, those stats look pretty good. For now, Disney is losing money on streaming, which has never been a problem. Disney reported an operating loss of $ 887 million from its streaming services for the quarter, up from a loss of $ 290 million a year ago. In the first six months of the fiscal year, Disney lost about $ 1.5 billion.

McCarthy revealed on Disney’s earnings call that direct-to-consumer programming and production costs will increase by more than $ 900 million in the third quarter year-over-year, “reflecting higher spending on Disney + and Hulu original content, an increase in costs. for sports rights and programming expenses on Hulu Live. “

In the past, investors didn’t really care if a company was losing money in streaming or increasing spending, because the companies were in “land grab” mode, according to GAMCO Investors portfolio manager Chris Marangi.

“We are no longer in the phrase of land grabbing,” Marangi said. “Now it’s about consolidation and rationalization.”

Netflix“The revelation that it expects to lose 2 million subscribers in the next quarter has led to a free fall of its stock and peers,” including Disney, which was the The worst performer of the Dow this year. Disney shares also hit a new 52-week low on Wednesday.

This could lead media executives to rethink their investor history. If massive streaming growth isn’t on the way, what’s up? LightShed analyst Rich Greenfield told CNBC that he thinks Disney should make a game to acquire Netflix or Roblox.

It would be a new story that he can tell.

WATCH: Disney Should Consider Selling Hulu For Netflix Robolox.