William Simpson
More than 6 million people have subscribed to Disney+ in the past three months, helping Walt Disney Co. post a surprise profit in its video-on-demand streaming division, executives at the entertainment giant said Tuesday.
The increase in profits comes after a difficult 18 months at the House of Mouse. In early 2023, CEO Bob Iger announced that 7,000 jobs would be cut across the company as part of a broader plan to reduce costs and financially stabilize the company.
At the same time, Disney found itself in a bitter political rivalry with Florida Governor Ron DeSantis over who should govern a slice of land in Orlando that the company had earmarked for its expansion.
With those challenges behind us, here are three things we learned from Disney’s second-quarter earnings report.
Disney made a profit from streaming for the first time
The company’s direct-to-consumer business, which includes Disney+ and Hulu, reported a profit of $47 million in the quarter, a sharp turnaround from a loss of $587 million in the same period a year ago. Revenue also showed solid growth, increasing 13% to $5.64 billion.
“The big surprise of the day came in the streaming sector, which finally managed to generate profits – well above forecasts – amid Hollywood’s massive strike period,” said Thomas Monteiro, senior analyst at Investing.com. “This indicates that perhaps the more global, low-cost production model, similar to Netflix, is probably the way forward in an operation that needs to rethink its growth expectations as a whole.”
In March, Disney+ subscriptions increased 6% to 117 million, while Hulu subscriptions grew 1% to 50 million.
“Looking at our company as a whole, it is clear that the recovery and growth initiatives we began last year have continued to produce positive results,” CEO Bob Iger said in a statement.
Entertainment and media giants like Comcast-owned NBCUniversal, Warner Bros. Discovery and Paramount Global (parent company of CBS News) have struggled to make a profit from streaming, given the high costs of producing content. For Disney, the challenge now will be to maintain momentum in streaming, reinvigorating the business while containing costs, a key priority for Iger as he resumed command of Disney in 2022.
Expect to see more sports content on Disney+
The 2024 NCAA Women’s Basketball Tournament It was a ratings bonanza for ESPN, Disney officials said Tuesday. Still, nearly 19 million viewers watching South Carolina battle Iowa in the championship game wasn’t enough to propel the sports programming network into the red this quarter.
ESPN’s profit fell 9% in the second quarter to $780 million, compared with $858 million a year ago. Revenue grew 4% to $3.8 billion. Disney said the loss stems in part from the network spending more money on production when it aired another college football championship game.
In an effort to boost ESPN’s revenue, Disney executives said Tuesday that a preview version of its ESPN+ content will be incorporated into what Disney+ subscribers will be able to see starting later this year. Short snippets of live sporting events and limited sports news will be used to appeal to casual sports fans, the company said.
Theme parks are open
With the pandemic in the rearview mirror, Disney’s global theme parks are flying high. Revenue at its US parks – Walt Disney World in Orlando and Disneyland in Anaheim, California – increased 7%, while overseas parks saw a 29% increase.
Disney executives acknowledged that the company has struggled with higher costs at its theme parks during the quarter due to inflation. In the US, this was partially offset by increased guest spending due to rising ticket prices and hotel room rates.
Overseas, Hong Kong Disneyland benefited from the opening of World of Frozen, a section of the park that includes attractions based on the popular “Frozen” films, in November.
—The Associated Press contributed to this report.
