Disney’s streaming business is profitable for the first time, but its parks unit lags
After years of losses totaling billions of dollars, Walt Disney Co.’s overall streaming business has reached profitability for the first time. Third-quarter results, however, were tempered by weakening demand at the company’s key parks unit.
The Burbank media and entertainment giant reported Wednesday that its streaming business — which includes Disney+, Hulu and ESPN+ — took in about $6.4 billion in revenue for its fiscal third quarter, up 15% compared with a year earlier.
The streaming business notched $47 million in operating income, compared with a loss of $512 million a year earlier. During the most recent quarter, ESPN+ helped boost Disney’s streaming business over the profitability hump, at a time when Disney+ and Hulu saw an operating loss of $19 million.
The milestone comes one fiscal quarter earlier than Disney executives had anticipated.
“This was a strong quarter for Disney,” Chief Executive Bob Iger said in a statement. “With our complementary and balanced portfolio of businesses, we are confident in our ability to drive earnings growth through our collection of unique and powerful assets.”
Achieving profitability in Disney’s streaming business has been a top priority for Iger, who earlier this year held off activist investor Nelson Peltz in a proxy fight. Among other things, Peltz demanded that Disney show a realistic plan for achieving large margins of profitability in its streaming business. To reach that goal, Iger undertook a wide-ranging cost-cutting effort across the company, which slashed thousands of jobs.
The cuts at Disney Entertainment Television will reportedly affect National Geographic, Freeform and local television stations, as well as marketing and publicity teams.
Overall, the company generated revenue of $23.1 billion during the fiscal third quarter, up 4% year over year. Earnings, excluding certain items, were $1.39 per share, up from $1.03 a year earlier and higher than analysts’ estimates.
Subscription prices for Netflix, Disney+, Max and Peacock have crept up in the last year, and more consumers are turning to the free, ad-supported video-on-demand streaming service owned by Fox.
The company’s studios business also contributed to the quarterly results, led by the success of Pixar’s “Inside Out 2.”
Disney’s entertainment division reported revenue of about $10.6 billion, up 4% year over year. Operating income for the segment totaled $1.2 billion, up from $408 million in the previous year. (The interest in “Inside Out 2” also drove viewers to Disney+, as the company said viewers’ desire to watch 2015’s “Inside Out” helped lead to more than 1.3 million sign-ups for the streaming service.)
Revenue for Disney’s sports business, which includes ESPN, increased 5% to about $4.5 billion, though the segment saw operating income of $802 million, down 6%. Domestic ESPN ad revenue rose 17% year over year, but it wasn’t enough to offset the $314-million operating loss from Disney’s Star India business, which saw higher programming and production costs due to the timing of the ICC T20 cricket World Cup.
It was a more muted quarter for the company’s experiences division, which includes its amusement parks and cruise line.
The division dominated the company’s financial results in recent fiscal quarters, aided in part by pent-up demand for travel since the pandemic. But for the most recent quarter, the division reported operating income of $2.2 billion, down 3% from last year.
Disney said the decrease in operating income was due to softening consumer demand.
The group brought in about $8.4 billion in revenue in the fiscal third quarter, up 2% year over year.
Inside the business of entertainment
The Wide Shot brings you news, analysis and insights on everything from streaming wars to production — and what it all means for the future.
You may occasionally receive promotional content from the Los Angeles Times.
