Walt Disney Company CEO Bob Iger attends the Nominees Luncheon for the 95th Academy Awards in Beverly Hills, California, U.S. February 13, 2023.
Mario Anzuoni | Reuters
Because DisneyThe future is here.
It’s been five years, but Disney almost turned a profit from its streaming units for the first time in the second quarter, losing just $18 million between Disney+, Hulu and ESPN+. That was an improvement from a loss of $659 million a year ago.
Eliminating ESPN+, Disney+ and Hulu actually made money in the quarter – $47 million. Last year, in the second quarter, Disney+ and Hulu lost $587 million.
The thesis of all the major traditional media companies is that streaming TV will eventually replace cable TV as the main moneymaker. That’s why Disney, Global Supreme, Warner Bros. Discovery And ComcastNBCUniversal’s both built their own subscription streaming services.
That hasn’t happened yet, but this quarter finally suggests that time is upon us. Not only is Disney barely making money on streaming — but the company’s traditional linear TV results are abysmal.
For years, Disney has held back on offering ESPN outside of its cable package because of how lucrative the sports network is inside the walled garden of traditional television. Those days are almost over. Disney is launched a slimmer package linear cable channels with Warner Bros. Discovery and fox in the fall, offering ESPN beyond traditional cable for the first time. Next year, Disney is launching its flagship ESPN streaming service, which will allow consumers to subscribe to ESPN without cable.
Looking at Disney’s results for the second quarter, it’s clear to see why the company ultimately withdrew its criticism on ESPN. While ESPN’s revenue increased 3% to $4.21 billion, operating income decreased 9% to $799 million. Disney said lower advertising revenue, a decline in cable TV subscribers and higher programming costs due to the College Football Playoff led to the decline.
The decline of the company’s other linear networks, such as ABC, Disney Channel, FX, National Geographic and Disney Junior, is even more alarming. Linear network revenue across Disney’s portfolio, excluding ESPN, fell 8% to $2.77 billion. Operating income plummeted 22% to $752 million.
Disney shares fell 5% in premarket trading.
New reality
Simply put, traditional television is dying. It is falling at the fastest rate consumers have ever seen.
Disney has been preparing for this moment for years. Disney reiterated that streaming will be profitable in the fourth quarter and will “be a meaningful future growth driver for the company, with further improvements in profitability in fiscal 2025,” the company said. said in its income statement.
The big question for the company is whether investors will accept this new reality. That will depend on Disney’s streaming performance in the coming years and possibly CEO Bob Iger. is still designated as his successor.
Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.
SEE: Top analysts estimate Disney’s streaming earnings to nearly break even for the quarter
