Disney takes hit despite achieving streaming profit

Source: Disney

Disney results took a tumble yesterday despite the company reporting its first profitable quarter of streaming, with a US$47 million operating profit from the Disney+ and Hulu operations for the three months to March, compared with a loss of US$587 million for the p0rior year quarter.

While the streaming business turned to profit for the second quarter, Disney warned that Q3 could see a temporary reversal due to the performance of Disney+ Hotstar in India. The company nevertheless maintains that its combined streaming businesses will be profitable in the fourth quarter, and to be a future growth driver for the company, with improvements in profitability in 2025.

Disney+ core subscribers increased by 6.3 million over the quarter to 117.6 million, with all of the growth coming from North America, offset by a slight decline in international markets. The North American service had 54 million subs at the end of March compared with 63.6 million internationally

Disney+ Hotstar meanwhile lost 2.3 million customers over the quarter to end with 36 million.

Hulu numbers edged up from 49.7 million in December to 50.2 million at the end of March, with all of the increase coming from SVOD only customers.

Disney+ core ARPU rose by US$0.44.

Direct-to-consumer revenues were up 13% to US$5.6 billion, partially offsetting an 8% drop in linear networks and a 40% decline in content sales and licensing.

Disney as a whole turned in revenues of US$22.1 billion for the quarter, up 1%. Operating income was US$3.8 billion, up 17%.

Disney saw a 5% drop in entertainment revenues, but a sharp rise in operating income from this segment of 72%, while sports revenue was up 2% and operating income down 2%. The experiences segment grew by 10%, with operating income up 12%.

Disney’s fall in share price came as investors appeared concerned about a slowdown in the experiences division and the company’s theme parks, with a slowdown in travel expected to hit Disney’s cruise lines business.

“Our strong performance in Q2, with adjusted EPS(1) up 30% compared to the prior year, demonstrates we are delivering on our strategic priorities and building for the future. Our results were driven in large part by our Experiences segment as well as our streaming business. Importantly, entertainment streaming was profitable for the quarter, and we remain on track to achieve profitability in our combined streaming businesses in Q4,” said CEO Bob Iger.

“Looking at our company as a whole, it’s clear that the turnaround and growth initiatives we set in motion last year have continued to yield positive results. We have a number of highly anticipated theatrical releases arriving over the next few months; our television shows are resonating with audiences and critics alike; ESPN continues to break ratings records as we further its evolution into the preeminent digital sports platform; and we are turbocharging growth in our Experiences business with a number of near- and long-term strategic investments.”