The Disney+ premium streaming service has grown to 164.2 million global subscribers, but the Walt Disney Co. warned Wednesday in its financial report for the fiscal fourth quarter that the subscriber growth rate will likely slow in the quarter ahead.

Bob Chapek, The Walt Disney Company CEO, said that across all of its streaming properties the company added nearly 57 million subscriptions in the full fiscal year for a total of more than 235.7 million subscribers, after adding 14.6 million total subscribers in the last quarter.

In addition to the Disney+ total that includes ESPN+ (now with 24.3 million paid subscribers) and Hulu (totaling 47.2 million subscribers).

With all of its streaming subscribers combined, Disney’s Disney+/hulu/ESPN+ services combined passed Netflix, which last reported having a total 223.1 million subs.

But the additions came in part from higher customer marketing and acquisitions costs which hurt its profitability. Disney said that despite the subscriber gains, its streaming operations lost nearly $1.5 billion.

Direct-to-Consumer revenues for the quarter increased 8% to $4.9 billion and operating loss increased $0.8 billion to $1.5 billion. The increase in operating loss was due to a higher loss at Disney+ and a decrease in results at hulu, partially offset by improved results at ESPN+, the company reported.

Results at Disney+ reflected higher programming and production costs, increases in marketing and technology costs and the absence of Premier Access releases in the current quarter, due to COVID, partially offset by higher subscription revenue.

Overall the company said revenues rose 9% in the three months, and were up 23% for its full financial year. It reported $162 million in profits, up from $159 million from a year ago. Total company revenue was at $20.15 billion.

“The rapid growth of Disney+ in just three years since launch is a direct result of our strategic decision to invest heavily in creating incredible content and rolling out the service internationally, and we expect our DTC operating losses to narrow going forward and that Disney+ will still achieve profitability in fiscal 2024, assuming we do not see a meaningful shift in the economic climate,” Bob Iger, Disney chairman said in the investors call.

He added that after realigning costs, raising prices and launching a Disney+ ad-supported tier, coming December 8, the company should realize a profit from its streaming business to drive investor value into the future.

The company said the decrease from the Disney Media and Entertainment Distribution was due to lower operating results at Direct-to-Consumer and Content Sales/ Licensing, partially offset by growth at Linear Networks.

The decrease at Direct-to-Consumer was due to higher losses at Disney+ and lower results at Hulu and higher losses at ESPN+. The decline from Content Sales/Licensing was attributed to a decrease in TV/SVoD distribution results, higher film cost impairments and decreases in home entertainment and theatrical distribution results, partially offset by an increase from the stage play business, following a COVID-19 related shut down in the prior year.

The company said the growth in Linear Networks reflected higher domestic Broadcasting and Cable results, partially offset by lower results internationally.

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Domestic Channels revenues for the quarter decreased 2% to $5.3 billion, and operating income increased 6% to $1.5 billion. The increase in operating income was attributed to higher results from Cable and a modest increase from Broadcasting.

The increase at Cable was due to lower programming and production costs, partially offset by a decrease in advertising revenue. The decrease in programming and production costs was due to lower costs for sports programming and a lower cost mix of non-sports programming. The decrease in sports programming costs was due to lower NBA and MLB rights costs, partially offset by higher NFL rights costs as a result of airing one additional game in the current quarter, the company said.

Lower costs for NBA rights was due to the timing of the NBA Finals, which aired in the third quarter of the current fiscal year compared to the fourth quarter of the prior year, as a result of a delayed start of the 2021 NBA season due to the pandemic.

A cost decrease for MLB programming was due to airing 16 games in the current quarter under a new contract compared to 45 games in the prior-year quarter. Lower advertising revenue was due to a decrease in rates and fewer impressions reflecting a decline in average viewership and fewer units delivered.

The company said its broadcasting operations grew modestly compared to the year-ago quarter as growth at the owned television stations from higher advertising and affiliate revenue was partially offset by lower results at ABC from higher programming and production costs, partially offset by growth in affiliate and advertising revenue.

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By Greg Tarr

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