NEW YORK (AP) — Disney said its Disney Plus streaming service reached nearly 29 million paid subscribers in less than three months, an impressive start for what the company has positioned as its future as more people drop cable subscriptions.
But as expected, starting up a new service comes with huge expenses, contributing to a 23% profit decline for the company in the latest quarter.
Disney Plus launched in November to compete with online video services like Netflix. Disney had 26.5 million Disney Plus subscribers as of Dec. 28, the end of its fiscal first quarter. That grew to 28.6 million as of Monday.
Original series on Disney Plus include the "Star Wars" series "The Mandalorian." One of the hit characters from the show is one resembling a baby version of Yoda. Disney CEO Bob Iger told analysts that "Baby Yoda" consumer products will go on sale in the coming months. He said the "sensational response" to the character said a lot about Disney Plus.
Disney also had 30.4 million Hulu customers and 6.6 million ESPN Plus subscribers as of Dec. 28, big gains for both from a year ago. Disney offers a bundle of the three streaming services.
Disney expects growth in the near term for Disney Plus to come primarily from outside the U.S., as the service launches over the next two years in Western Europe, India and Latin America. Disney also plans to roll out Hulu outside the U.S. next year after getting Disney Plus off the ground abroad.
Disney earned $2.13 billion in the latest quarter, or $1.17 per share. Adjusted for one-time items, earnings came to $1.53 per share. Analysts polled by FactSet expected earnings of $1.46. Revenue rose 36% to $20.9 billion. Wall Street expected revenue of $20.7 billion.
Disney shares rose 1.2% in after-hours trading to $146.50.
Revenue slid at Disney's cable networks division, by 20% to $4.8 billion. It said ESPN weighed on its profit because of higher programming and production costs and lower ad revenue as viewers decline.
The broadcasting arm's revenue rose 34% to $2.6 billion, while the parks division's sales rose 8% to $7.4 billion and the movie business more than doubled to $3.8 billion thanks to "Frozen II" and "Star Wars: The Rise of Skywalker" in theaters.
The direct-to-consumer business that includes Disney Plus posted revenue of $4 billion, up from $918 million a year ago, while its operating loss widened to $693 million from $136 million.