Disney’s streaming business turns a profit in its first financial report since Iger’s challenge

The Walt Disney Co. swung to a loss in the second quarter due to restructuring and impairment charges, but its adjusted earnings beat expectations and its streaming business turned a profit. Theme parks also continued to perform well and the company raised its expectations for this year.

While Disney said on Tuesday that it expects its overall streaming business to decline in the current quarter due to its platform in India, Disney+ Hotstar, it expects the combined streaming business to be profitable in the fourth quarter and be an important driver of future growth for the company. The company, with further improvements in profitability in fiscal year 2025.

The direct-to-consumer business, which includes Disney+ and Hulu, reported quarterly operating income of $47 million compared to a loss of $587 million a year earlier. Revenue rose 13% to $5.64 billion.

For the combined streaming business, which includes Disney+, Hulu and ESPN+, operating losses in the second quarter narrowed to $18 million from $659 million, while revenue improved to $6.19 billion from $5.51 billion.

Disney+’s core subscribers rose more than 6% in the second quarter.

However, Disney’s improved image regarding streaming comes as its cable business declines. This segment saw revenue decline 8% last quarter.

“Looking at our company as a whole, it is clear that the transformation and growth initiatives we launched last year have continued to deliver positive results,” CEO Bob Iger said in a prepared statement.

Speaking during Disney’s conference call, Iger said the company plans to add an ESPN tab to Disney+ by the end of the year, a maneuver previously done with Hulu. This will give US subscribers access to some live sports and studio programming within the Disney+ app.

ESPN, Fox and Warner Bros. have announced Discovery Plan in February to launch a fall sports streaming platform that will include shows from at least 15 networks and all four major professional sports leagues.

Iger also said the company will begin cracking down next month Share password For the live streaming service in some markets, it will expand this campaign globally in September.

While Disney has high-quality streaming content, Iger said the company must now focus on building its own technology, similar to what competitors like Netflix are doing. These actions, including the password campaign, are expected to improve profits.

It is the first financial report since shareholders rejected the efforts of activist investor Nelson Beltz To gain seats on the company’s board of directors last month, standing firmly behind Iger as he tries to revitalize the company after a difficult period.

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Some Disney investors may have been expecting more from the quarterly report, but “the company has shifted its operations to its core business model, which is more conservative in nature,” said Thomas Montero, senior analyst at Investing.com.

Montero focused on the company’s efforts to turn its live streaming division profitable.

“The biggest surprise of the day came in the form of streaming, which finally managed to turn a profit — well ahead of expectations — amidst a massive strike period in Hollywood,” Montero said. “This suggests that perhaps a more global, low-cost, Netflix-like model is the way to go in an operation that needs to rethink its growth outlook as a whole.”

Disney’s domestic theme park revenues rose 7%, while its overseas theme parks recorded a 29% increase.

But Disney admitted that it suffered from higher costs at its theme parks during the quarter due to inflation.

The company said that there was an increase in spending by Walt Disney World guests due to higher ticket prices, while Disneyland guests increased their spending due to higher ticket prices and hotel room rates.

Abroad, Hong Kong Disneyland benefited from the opening of Frozen World, a section of the park that includes rides inspired by the famous “Frozen” films, in November.

Like many tourist destinations, Disney continues to adapt to post-pandemic travel.

“While consumers continue to travel in record numbers, and we continue to see healthy demand, we are seeing some evidence of global moderation from the post-Covid travel peak,” CFO Hugh Johnston said during the call.

For the period ending March 30, Disney lost $20 million, or a penny per share. That compares to a profit of $1.27 billion, or 69 cents per share, a year ago.

Restructuring and impairment charges rose to $2.05 billion from $152 million in the same period a year earlier.

Adjusted earnings, which excluded fees and other items, were $1.21 per share, easily beating the $1.12 per share expected by analysts surveyed by Zacks Investment Research.

Disney said that given its second-quarter performance, it now has a full-year adjusted earnings per share growth target of 25%. It had previously expected growth of at least 20%.

The Burbank, California-based company’s revenue rose to $22.08 billion from $21.82 billion a year earlier, but was slightly below Wall Street estimates of $22.13 billion.

Content sales and licensing revenues declined 40% because Disney did not release any significant movie titles during the second quarter compared to the same period a year earlier, which included the release of “Ant-Man and the Wasp: Quantumania.” Last year’s results were also helped by the continued performance of “Avatar: The Way of Water,” which is released in December 2022.

Shares fell more than 10% on Tuesday.

In February, The Walt Disney Company said it had made “significant cost reductions” and reduced selling, general and other expenses by $500 million in the first quarter. Company Thousands of jobs cut In 2023.

In March, allies of Gov. Ron DeSantis and Disney reached out to A.J Colony An agreement is in a state court battle over how Walt Disney World will be developed in the future after the Florida governor’s takeover of the theme park resort’s government.

The Actors’ Equity Association said last month that performers at Disneyland in California and the union that regulates them They have filed a petition For trade union recognition