Live Streaming Unit Makes First Profit While Theme Parks Business Lags

Disney (DIS) reported Wednesday that its streaming division turned a profit for the first time, though weakness in its theme parks division weighed on an otherwise positive report as the company noted “moderation in consumer demand” toward the end of the quarter.

In Disney’s fiscal third quarter, its direct-to-consumer (DTC) streaming business, which includes Disney+, Hulu and ESPN+, reported operating income of $47 million, compared to a loss of $512 million in the year-ago period. The company had previously expected to reach overall profitability from streaming by the current quarter.

Overall, the company reported adjusted third-quarter earnings of $1.39 per share, above the $1.19 analysts surveyed by Bloomberg had expected and above the $1.03 Disney reported in the same period a year earlier.

Revenue was $23.2 billion, beating consensus expectations of $23.1 billion and up from $22.3 billion in the year-ago period.

Disney also raised its full-year adjusted earnings growth forecast to 30%, up from 25% previously.

Disney shares initially rose in premarket trading Wednesday before paring those gains. Shares fell about 3% shortly after the opening bell. By the time of the report, Disney’s stock was roughly unchanged this year.

Looking ahead, Disney said it remains on track to improve streaming profitability in the fourth quarter with both DTC entertainment, which reported a $19 million loss in the third quarter, and ESPN+ expected to be profitable.

“We continue to feel optimistic about our trajectory, with several building blocks in place to improve margins over the coming years,” the company said in the statement.

Among these key elements is the new price increase for these services. On Tuesday, the company announced And announced that it will raise prices again. The company is planning to change its plans for Disney+ and Hulu, with the changes set to go into effect in October. The company is also planning to add new features like access to ABC Live and a playlist of content designed for young children.

“Every time we’ve raised prices, we’ve seen only a small dip in demand. Nothing that we consider significant,” Disney CEO Bob Iger said on the call. He added that the goal of live streaming is to “increase engagement on the platform,” hence the new features and bundling opportunities.

In the third quarter, the media giant saw a slight increase in the number of Disney+ subscribers, to 118.3 million from 117.6 million a year earlier. Analysts had expected subscriber numbers to remain roughly flat.

Average revenue per user, or ARPU, fell 3% to $7.74 for domestic Disney+ users despite recent price hikes and a crackdown on password sharing. On the earnings call, Disney CFO Hugh Johnston said increased bundling and shifts to the advertising category weighed on the metric.

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Disney’s theme park business was the main disappointment for the quarter, with domestic operating income down 6% from a year earlier to $1.35 billion. The company warned that slowing demand could continue over the “next few quarters.”

“While we are actively monitoring attendance and guest spending and aggressively managing our cost base, we expect our Experiences segment operating income in the fourth quarter to decline by a mid-single percentage point compared to the prior year, reflecting these underlying dynamics,” the company said in a statement.

On the earnings call, Johnston sounded somewhat optimistic, saying, “While we’ve seen a slight slowdown in demand, I certainly wouldn’t call it a big change.” He added that the company expects to see “fairly stable” revenue from parks in the current quarter.

The company added that Disneyland Paris will be impacted by lower natural consumer demand trends due to the Olympics, along with some cyclical downturn in China. The company said it still sees “strong” demand for its cruises.

Meanwhile, linear struggles continued with local linear network revenue down 7%, due to lower advertising revenue and lower affiliate revenue as more consumers cut the cord. Operating income within the segment fell 1%.

ESPN bucked the downward trend, with the sports giant’s domestic operating income rising 1% due to growth in advertising and subscription revenue.

In February, Disney strengthened its presence in sports streaming by announcing a joint partnership with Fox and Warner Bros. Discovery. The company is also working on a separate sports streaming platform for ESPN, slated to launch in the fall of 2025.

Disney’s theatrical strength also appears to be back on track, with strong showings for films like “Inside Out 2” and more recent releases. “Deadpool and Wolverine.” It’s also on track to lead the box office in the second half of the year with the upcoming releases of “Moana 2” and “Mufasa: The Lion King.” As a result, content sales and licensing revenues have soared, jumping to $245 million in the third quarter compared to a loss of $112 million a year earlier.

Alexandra Channel She is a senior reporter at Yahoo Finance. You can follow her on X @Ali_Canal, LinkedIn, You can email her at [email protected].

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