Disney (DIS) reported its fiscal third-quarter results on Wednesday, revealing that its total streaming division had turned a profit for the first time. This was a significant milestone for the company, as it had previously expected to achieve total streaming profitability by this quarter. The direct-to-consumer (DTC) streaming business, which includes Disney+, Hulu, and ESPN+, posted operating income of $47 million, a stark improvement from the $512 million loss in the prior-year period.
Overall, Disney reported adjusted earnings of $1.39 per share, surpassing analysts’ expectations of $1.19 and higher than the $1.03 reported in the same period last year. Revenue also exceeded consensus estimates, coming in at $23.2 billion compared to $22.3 billion in the year-ago period. The company raised its guidance for full-year adjusted earnings growth to 30%, up from the previous 25%.
Despite the positive streaming results, Disney’s parks division experienced weakness, which impacted the overall report. The domestic operating income for the parks business dropped by 6% from the prior year to $1.35 billion. The company noted a “moderation of consumer demand” towards the end of the quarter and warned that this trend could continue over the next few quarters. Disneyland Paris was specifically mentioned as being impacted by reduced consumer demand due to the Olympics and cyclical softening in China.
On the other hand, Disney’s linear business faced challenges, with domestic linear network revenue declining by 7% primarily due to a drop in advertising revenue and lower affiliate revenue as more consumers cut the cord. However, ESPN managed to buck the trend with a 1% increase in domestic operating income, driven by growth in advertising and subscription revenue.
Looking ahead, Disney remains optimistic about its streaming profitability, with plans to improve margins over the coming years. The company announced price hikes for its Disney+ and Hulu plans, set to take effect in October, along with new features like access to ABC Live and content catered towards young children. Disney CEO Bob Iger emphasized the goal of growing engagement on the platform through these initiatives.
In terms of content, Disney’s theatrical power seems to be back on track, with successful releases like “Inside Out 2” and “Deadpool & Wolverine.” The company is poised to lead the box office in the second half of the year with upcoming releases such as “Moana 2” and “Mufasa: The Lion King.” Content sales and licensing income surged in Q3, reaching $245 million compared to a loss of $112 million in the prior year.
In conclusion, Disney’s latest earnings report showcased the company’s progress in the streaming space while highlighting challenges in its parks and linear businesses. With a focus on improving margins, expanding content offerings, and adapting to changing consumer behaviors, Disney continues to position itself for long-term success in the evolving entertainment landscape.
