Walt Disney (DIS 0.11%) CEO Bob Chapek surprised investors when he shared internal expectations to add "low-single-digit millions of subscribers" in the company's fourth quarter. Wall Street analysts had been expecting around 17 million net additions for the quarter before the announcement. 

But it's important to dive deeper, beyond the headlines, and understand why Chapek expects such a big shortfall, and how that affects the long-term outlook for the streaming service. Chapek pointed to three setbacks in the current quarter negatively affecting subscriber growth.

The Disney+ logo.

Image source: Walt Disney.

1. Production delays

The COVID-19 pandemic has resulted in production delays across the industry. Not only did studios have to shut down production last spring, but they've also faced continued setbacks in restarting. The delta variant shut down several productions for Disney this summer, resulting in a lighter content slate for the quarter than originally anticipated.

New original content is a driving force behind getting new subscriber signups. That's noticeable in other companies as well, like Netflix (NFLX 1.53%). The streaming leader saw net additions plummet in the first half of 2021, but that corresponded with a drop in content amortization expense growth. Management expects growth to pick up in the third quarter. As Disney struggles to bring new content to the platform, it's no surprise it's struggling to bring a lot of new users.

But Chapek notes that productions are in full swing again. It outlined over a hundred titles at its investor day last year, and it's working to deliver those. As Disney fills out its content catalog and develops a strong pipeline of new content releases on the platform, subscriber additions should follow.

2. Timing renewals for Disney+ Hotstar

Disney+ Hotstar had a great fourth quarter in 2020. Millions of new subscribers signed up as the India Premier League cricket season kicked off. And most subscribers signed up for the yearlong subscription.

However, a new Indian law doesn't allow subscriptions like Disney+ to auto-renew anymore. A subscription must be reauthorized upon expiration, so that could lead to increased churn in the country.

The saving grace is the IPL pushed back its season once again this year. Matches started last week, and Disney should be able to get the cricket fans who signed up last year to do so again. That said, it'll take time, and renewals could bleed well into October as the season gets under way.

3. Delayed Star+ launch and slow ramp-up

Management announced the delayed launch of Star+ in Latin America during Disney's second quarter earnings call in May. The service, which expands on Disney+ with sports and other general entertainment content, officially launched at the end of August. While analysts knew about the delay for months, they may not have expected a slow launch in the region.

Chapek pointed out that Latin America is actually a lot of different markets, and it's also a region where its go-to-market strategy relied heavily on partnerships. Those partners were slow to ramp up messaging around Disney+, and they're likewise slow to ramp up Star+.

Chapek is confident that it can work with partners to get the messaging on Star+ out and ensure consumer awareness. It just takes time. The company saw the same pattern play out with the launch of Disney+ in several Latin American markets.

The good news for investors

There are two reasons for investors to remain optimistic about Disney and Disney stock.

First of all, all of the reasons for slow subscriber growth in the fourth quarter appear to be temporary hiccups and not a sign of a broader prolonged slowdown. Production is ramping back up, churn will normalize in India, and the Star+ launch should progress in Latin America to reach more consumers. All that should lead to stronger subscriber growth in the first half of fiscal 2022.

Moreover, the weakness is mostly confined to international versions of the service that produce lower revenue per user, like India and Latin America. Chapek said core Disney+ will continue to grow. That means Disney should see minimal impact on its actual revenue and earnings results.

The outlook remains strong for Disney's streaming service, and investors shouldn't be afraid of a bit of turbulence in its path toward its long-term outlook of 230 million to 260 million subscribers.