What's going on?

Disney�s gone from hero to zero: the firm reported disappointing quarterly results this week.

What does this mean?

Disney�s fairy tales might tell sparkling rags-to-riches stories, but the company�s results sound more riches-to-rags right now. The firm celebrated some magic, sure: Mickey-Mouse-ear-clad crowds flocked to Disney�s US theme parks in almost pre-pandemic force, each spending 40% more on average than in 2019. And the firm’s streaming services���Disney+, ESPN+, and Hulu � were the belle of the ball, captivating nearly 15 million new subscribers last quarter, enough to keep Disney�s total count well above Netflix�s. But that�s where the magic ends: the streaming growth came after dizzying marketing and content spending, so the segment�s operating losses more than doubled to reach $1.5 billion. That sure broke the spell: overall revenue and profit fell well short of analysts� expectations, prompting disenchanted investors to send shares down 10%.

Why should I care?

Zooming in: Turn this frog into a prince.
Disney was quick to assure investors that while streaming growth might slow, the segment�s �peak losses� were behind it. In fact, the firm believes Disney+ will turn its first profit in 2024, and that�s not just wishful thinking: the entertainment giant�s set to hoist its flagship streaming service�s prices by nearly 40% next month, and it�s launching an ad-supported version that�s tipped to make $800 million in ad sales each year. Sprinkle in that the segment�s spending is forecast to dip next year, and that goal could be within reach ��Bibbidi-Bobbidi-Boo�indeed.

The bigger picture: Better the devil you know.
Disney and Netflix look like they�re following similar tracks right now, prioritizing making more money from existing subscribers over attracting new ones. After all, it�s getting trickier to grow memberships and profit at the same time, and analysts prefer profit right now. Just look at Paramount Global: it reported robust subscriber growth last week, but the fact it missed profit expectations by a mile sent shares plummeting 12%.