To understand the forces unsettling the biggest media companies, you need look no further than Disney’s bottom line. The economics of streaming have improved considerably. But it’s in free fall, not fast enough to offset the decline of conventional TV.
Disney announced Wednesday that its streaming business lost $659 million in the most recent quarter, an improvement from the same period last year (a significant improvement from the October-December quarter, which totaled $1.1 billion in losses). Streaming revenue he increased by 12%. This reflects a sharp increase in revenue per Disney+ paying subscriber, a metric that investors have been watching closely.
The problem is that Disney still relies on old TV channels for a huge portion of its profits. Disney’s linear network (ESPN, Disney Channel, ABC, National Geographic, FX) reported operating income of $1.8 billion, down 35% year-over-year. Earnings he decreased by 7%.
Disney Chief Executive Robert A. Iger called the decline of traditional TV a “worrying situation” during a revenue-related conference call with analysts. Disney shares fell more than 4% in after-hours trading on Wednesday.
As part of its efforts to make streaming more profitable, Disney has announced that Hulu content will be available on Disney+ to subscribers of both services in the United States. Iger said this “one app” experience will roll out by the end of the year. Hulu, which does not operate overseas, will also continue as a standalone product.
Disney+ content is primarily aimed at children and families. Adding more generalized Hulu content will “increase engagement, increase opportunities to serve digital ads, and grow the advertising business,” he said.
Disney owns 67% of Hulu and Comcast owns the rest. Under a 2019 agreement, Disney is on the verge of acquiring Comcast. Iger suggested on Wednesday that Disney wants the deal.
“We’ve had some conversations with them already,” he said. “I can’t say for sure where they’re going.” We started the conference call by congratulating arch-rival Comcast on the success of the animated Super Mario Bros. Movie.
Disney+ subscribers have declined in the last six months. One reason is that Disney has pulled back on costly “subscriber acquisition” efforts — marketing campaigns that try to persuade people to subscribe. Disney+ now has about 158 million subscribers worldwide, down 2% from December. Most of the losses are due to ultra-low priced subscriptions in India. Disney+ peaked at 164 million subscribers in October.
Disney had 231.3 million Disney+, Hulu and ESPN+ subscriptions in the quarter, down from 234.7 million in December.
Unlike most of its competitors, Disney has a safety net in the form of its theme parks. Operating profit at the company’s Parks, Experiences & Products division rose 22% to $2.2 billion as Disney resorts in Shanghai and Hong Kong finally began to recover from the pandemic. Disneyland Paris has seen a surge in attendance since the Marvel-themed expansion opened last summer.
Disney World in Florida and Disneyland in California also increased attendance, but higher costs (for example, the introduction of a new Tron-themed roller coaster) reduced profitability in Florida. Disney Cruise Line bookings were strong. expansion of its fleetthe company said.
It was Disney’s first full quarter under Iger’s second reign, which he returned as CEO in November. He replaced Bob Chapek, who was fired from the board following a string of missteps, including the company’s handling of controversial Florida education laws. The fallout from that issue led to a legal battle with Governor Ron DeSantis over Disney World’s future expansion and oversight.
On Wednesday, Iger said the company is “evaluating where it makes the most sense to direct future investments” for building theme parks, underscoring the stalemate in Florida. Disney had announced last month that it would allocate $17 billion to Disney World expansion projects over the next decade before things got worse for DeSantis.
When asked by analysts about the tense situation in Florida, Iger reiterated that Disney viewed it as unconstitutional retaliation for its opinion on education law.
Overall, Disney posted $21.8 billion in sales, up 13% year-over-year, slightly above analyst estimates. Disney reported earnings of 93 cents per share, excluding certain items that affect comparability, in line with analyst expectations.
Disney is in the process of cutting about 7,000 jobs, or about 4% of the global total, as part of a campaign to cut costs by $5.5 billion. He has been fired twice so far. The final round is expected by the end of this month.
The company continues to pour money into the original Disney+ program. The third season of ‘The Mandalorian’ began service in his March. Ahsoka, another gorgeous series set in the Star Wars universe, is set to premiere on Disney+ this summer.
At the same time, however, Disney said it would begin removing some content from its streaming service, especially in overseas markets where growth potential is limited.
