Disney Reports Surprise Profit in Streaming Division
Disney Shares Fall Despite Profit in Streaming Entertainment Division
LOS ANGELES – Walt Disney reported a surprise profit in its streaming entertainment division, raising hopes for its adaptation to the shifting consumer landscape. However, the positive news was overshadowed by a decline in the traditional TV business and weaker box office performance. As a result, Disney shares experienced a 6% decrease prior to the market open on Tuesday.
Transition from Cable TV to Streaming Entertainment
Disney, like many other media companies, has been striving to adjust to the consumer migration from cable television to streaming entertainment. In an effort to compete with industry giants like Netflix, Disney launched its streaming service, Disney+, in 2019. Despite consistent efforts, the division has faced financial losses since its inception.
Surprising Turnaround for Disney’s Streaming Division
Nevertheless, the direct-to-consumer entertainment division, which comprises Disney+ and Hulu, reported an operating income of $47 million for the January-March period this year, an impressive improvement from a loss of $587 million during the same period last year. However, the combined streaming business, including ESPN+, faced a loss of $18 million. Nevertheless, the division has made significant progress compared to the staggering $659 million loss from the prior year.
Decline in Traditional TV Business
Disney faced an 8% decline in revenue from its traditional television business, amounting to $2.77 billion. Furthermore, operating profit witnessed a 22% decrease compared to the previous year.
Leadership’s Positive Outlook
Chief Executive Bob Iger, who successfully defended against board challenges from activist investors last month, expressed optimism regarding the company’s future. He stated, “Our strong performance this past quarter demonstrates we have turned the corner and entered a new era for our company.” Iger emphasized the steps taken to solidify Disney’s position as a premier creator of global content. His strategic vision, implemented since his return from retirement in November 2022, includes extensive cost-cutting measures, expected to surpass $7.5 billion by the end of September, and a 10-year, $60 billion investment in theme parks.
Roots of the Profitability
The unexpected profit in the streaming entertainment division is largely attributed to aggressive cost management, as stated by Chief Financial Officer Hugh Johnston. By effectively streamlining operations, the streaming unit’s loss dropped from $587 million last year to the current profit.
Customer Growth and Revenue Increase
Disney+ welcomed over 6 million new customers during the last quarter while average revenue per user saw a rise of 44 cents (excluding India, where a separate lower-priced plan is offered). Additionally, Disney expressed confidence in the future performance of its streaming unit, stating that it should generate a fiscal fourth-quarter profit and contribute to meaningful growth for the company, including improved profitability in fiscal 2025.
Impressive Financial Results
Excluding certain items, Disney posted diluted earnings per share of $1.21 for the second quarter, surpassing analysts’ estimate of $1.10. Quarterly revenue reached $22.1 billion, aligning with market expectations. The company’s experiences division, which encompasses Disney theme parks worldwide, reported operating income of $2.3 billion, a commendable 12% increase from the previous year. Furthermore, the entertainment segment, which encompasses traditional TV, streaming, and film, experienced a 72% year-on-year increase in operating income, reaching $781 million. The sports unit, including ESPN, witnessed a slight decline of 2% in operating income, partially attributed to the timing of college football playoff games.
Revised Earnings Forecast and Outlook
Disney has adjusted its earnings per share forecast, expecting a 25% increase this fiscal year, up from the previous projection of 20%. The company attributes this upward revision to exceptional results in its theme parks division and signs of improvement in the streaming business.
For more information, read the full article at the official Disney news website.
