Disney’s Surprise Entertainment Streaming Profit Offset by Weaker TV Business
By Lisa Richwine
LOS ANGELES (Reuters) – Walt Disney Co’s surprise profit from its streaming entertainment division was eclipsed by a decline in its traditional TV business and a weaker box office, sending its shares down 6% before the bell on Tuesday. fair.
Like other media companies, Disney has been trying to adapt to consumers’ migration from cable television to streaming entertainment and promised Wall Street that its streaming operation would become profitable by September.
The division has been losing money since Disney+ debuted in 2019, in a major effort by the company to compete with Netflix.
The direct-to-consumer entertainment division, which includes streaming services Disney+ and Hulu, reported operating profit of $47 million in the January-March period, compared with a loss of $587 million a year earlier.
But the combined streaming business with ESPN+ lost $18 million. The division had lost $659 million the previous year.
Revenue from the traditional television business fell 8% to $2.77 billion, and operating profit fell 22% from the previous year.
“Our strong performance last quarter demonstrates that we have turned the corner and entered a new era for our company,” said Chief Executive Bob Iger, who defeated challenges from the board of activist investors last month.
“The steps we are taking today help solidify Disney’s place as a preeminent creator of global content,” said Iger.
Iger, who came out of retirement to revamp Disney in November 2022, has instituted cost cuts that are expected to reach at least $7.5 billion by the end of September.
He also revealed a $60 billion investment in theme parks over 10 years and announced plans for a standalone ESPN streaming app, among other efforts.
The earlier-than-expected profit from streaming entertainment was driven by aggressive cost management, Chief Financial Officer Hugh Johnston said in an interview. A year ago, the streaming unit lost $587 million.
Disney+ added more than 6 million customers during the quarter, and average revenue per user increased 44 cents outside of India. Disney offers a lower price plan in India that counts separately.
Due to the costs of broadcasting cricket, streaming entertainment will likely report a loss in the current quarter but return to profit in the following period, Johnston said.
The combined streaming unit is expected to generate a fiscal fourth quarter profit and become a “significant driver of future growth for the company, with further improvements in profitability for fiscal 2025,” Disney said in its statement.
During the second quarter, the Mouse House reported diluted earnings per share, excluding certain items, of $1.21, above analysts’ estimate of $1.10, according to LSEG data. Quarterly revenue increased to $22.1 billion, in line with expectations.
The company’s experiences division, which includes Disney theme parks around the world, reported operating profit of $2.3 billion, a 12% increase from the previous year.
In Disney’s entertainment segment, home to its traditional TV, streaming and film businesses, operating profit increased 72% year-over-year to $781 million.
The sports unit that includes ESPN saw operating profit fall 2% to $778 million, which was attributed to the timing of college football playoff games.
Disney now expects adjusted earnings per share to increase 25% this fiscal year, up from its previous forecast of a 20% increase. The company attributed the change to strong results at its theme parks and improvements in its streaming business.
(Reporting by Lisa Richwine in Los Angeles; additional reporting by Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles and Sheila Dang in Austin; editing by Peter Henderson, Anil D’Silva and Arun Koyyur)
