A rival’s woes spooked investors.
What happened
Shares of Walt Disney ( DIS -5.56% ) fell 5.6% on Wednesday after Netflix‘s ( NFLX -35.12% ) declining subscriber figures sparked concerns of intensifying competition in the streaming arena.
So what
Netflix lost 200,000 subscribers in the first quarter. The streaming pioneer said the launch of new streaming services from traditional entertainment companies was a key reason for its slowing growth.
Worse still, Netflix warned that its subscriber losses could expand to 2 million in the second quarter.
Image source: Getty Images.
Some of Netflix’s losses could be attributed to the success of Disney+. Disney’s popular streaming service added 11.8 million subscribers in its fiscal 2022 first quarter, which ended on Jan. 1. The entertainment colossus ended the period with 129.8 million Disney+ customers — and a total of 196.4 million subscribers when including its ESPN+ and Hulu streaming services.
However, Disney is likely facing the same competitive threat from new rivals that’s bogging down Netflix’s expansion. Investors are worried that we’ll soon see evidence of heightened streaming competition when Disney releases its second-quarter financial results on May 11.
Now what
After millions of consumers canceled their cable packages and shifted their TV viewing habits to streaming options, Disney finally made a major push into streaming with the launch of Disney+ in late 2019. The service’s rapid growth during the pandemic led investors to view Disney+ as the solution to the company’s cord-cutting woes.
However, while its subscriber and revenue growth has been impressive, Disney+ is not yet profitable. In its first-quarter earnings call, Disney management said it was confident that the company can achieve profitability and reach its goal of 230 million to 260 million Disney+ subscribers by the end of fiscal 2024. But competitive pressure from the likes of HBO Max, Paramount+, and other streaming rivals could make those goals difficult to accomplish.
