The drop comes despite Disney sharply reducing losses in its streaming business in the second quarter, helped by higher prices for Disney+. But it also lost about 300,000 subscribers in the U.S. and Canada, while its global subscriber count was also sliced due to cancellations in India, where Disney last year lost the rights to stream a popular cricket league that powered new sign-ups.

Total global subscribers to Disney+ ended the quarter down by four million at 157.8 million. Analysts expected the streaming service to increase sequentially to 163.2 million subscribers. 

The projections for continued subscriber softness for Disney+ in the current quarter, as well as muted growth at domestic theme parks, worried analysts. Truist analyst

Matthew Thornton
said the higher domestic Disney+ prices, as well as lower marketing, were weighing on subscriber counts.

Disney Chief Executive

Robert Iger
said that the company was happy that the recent price increase for the non-ad-supported version of Disney+ was “de minimis.”

“That leads us to believe that we, in fact, have pricing elasticity,” he said on a call with analysts Wednesday.

Mr. Iger also said Disney would make Hulu content available within Disney+ in the U.S. by the end of the year, though the streaming platforms including ESPN+ would remain available as stand-alone options. 

Analysts at UBS said the decision to combine the streaming platforms puts to rest any doubt Disney will take 100% control of Hulu in January, adding that the company could see additional savings to its previously outlined plans to slash $5.5 billion in costs. One-third of Hulu is owned by rival
Comcast,
which Disney said it has begun to have negotiations with. 

Disney’s theme parks, meanwhile, will likely post weaker growth numbers in the second half of the year, compared with last year’s performance tied to the 50th anniversary of Walt Disney World’s opening.

“This comparison, coupled with inflationary cost pressures, including from a new union agreement, is expected to drive a modest adverse impact to domestic parks and experiences operating margins in the third quarter compared to the prior year,” financial chief

Christine McCarthy
said. Operating margins for domestic parks and experiences should be higher than a year earlier, she added, because of ongoing strength in international parks. 

Despite the challenges, analysts tallied positive takeaways from the quarter including Disney being on track to meet or exceed its cost targets and its best free cash flow since 2019.

Write to Denny Jacob at [email protected]