After billions of dollars in losses, The Walt Disney Company’s overall streaming business has turned a profit for the first time. However, third-quarter results were dampened by weak demand in the company’s flagship parks segment.
The Burbank media and entertainment company said Wednesday its streaming business — which includes Disney+, Hulu and ESPN+ — had revenue of about $6.4 billion in its fiscal third quarter, up 15% from a year earlier.
The streaming business posted $47 million in operating income, compared with a loss of $512 million a year ago. In the most recent quarter, ESPN+ helped Disney’s streaming business turn a profit, during which time Disney+ and Hulu saw operating losses of $19 million.
The milestone comes a fiscal quarter earlier than Disney executives had expected.
“What we’re seeing in streaming is significant success, driven largely by the success of our creative,” Chief Executive Bob Iger said during a call with analysts Wednesday morning. “We are excited about the future of this business.”
Achieving profitability in Disney’s streaming business has been a top priority for Iker, who earlier this year fended off activist investor Nelson Peltz in a proxy fight. Among other things, Peltz demanded that Disney show a realistic plan to achieve greater profitability in its streaming business. To achieve that goal, Iger undertook a company-wide cost-cutting initiative that cut thousands of jobs.
Product and technology improvements in its streaming services will pay dividends, company executives said. Bundles such as Warner Bros.’ recent deal with Discovery to offer Disney+, Hulu and Max for a single price have helped ease the subscriber crunch, while the company’s initial efforts to curb password sharing have not been significantly countered. regression.
Overall, the company posted revenue of $23.1 billion in the fiscal third quarter, up 4% year over year. Earnings, excluding certain items, were $1.39 a share, up from $1.03 a year ago and beating analysts’ estimates.
But investors are not convinced. Shares of Disney fell 4.5% to $85.96. Disney’s stock is down 30% from its recent high in April.
Wall Street focused more on the muted results of the company’s experience division, which includes its amusement parks and cruise lines and merchandise.
The segment has dominated the company’s financial results in recent fiscal quarters. But in the most recent quarter, the division’s operating income was $2.2 billion, down 3% from last year.
Disney said operating income fell due to lower consumer demand. Revenue at Disney parks is often considered a bellwether for the broader economy, as it reflects spending trends and consumer sentiment. US consumers are beset by inflation, and recent jobs data have renewed fears of an impending recession.
“While investors cheered Disney’s progress on the streaming side, worrisome news about the Parks unit sent shares lower in pre-market trading and will increase pressure on CEO Bob Iger to deliver strong shareholder returns,” said Emarketer vice president Paul Verna. In an email statement.
Results for the company’s US-based parks were down “modestly,” although visitation was comparable year-over-year and per capita spending “increased slightly,” the company said. Parks-goers have long been concerned about Disney vacations and business overpricing and mounting surcharges for line-skipping concessions.
The group posted revenue of $8.4 billion in the fiscal third quarter, up 2% year-on-year.
The company expects to see “flat-ish” revenue for its experience division in the fourth quarter and for several quarters after that, Chief Financial Officer Hugh Johnston said on a call Wednesday. Disney cited the impact of the Olympics on attendance at Disneyland Paris and a “softening cycle” in China as factors for the fourth-quarter results.
And competition is on the horizon. In Orlando, Walt Disney World will soon face a new competitor in Universal’s Epic Universe theme park, set to open next year, which will feature four themed lands, including a “How to Train Your Dragon” area and Super Nintendo World.
The company’s recovering studios business contributed to the quarter’s results due to the success of Pixar’s “Inside Out 2.”
Disney’s entertainment division generated revenue of about $10.6 billion, up 4% year-over-year. The segment’s operating income totaled $1.2 billion, compared to $408 million in the prior year. (Interest in “Inside Out 2” drove viewers to Disney+, and viewers’ desire to see 2015’s “Inside Out” led to more than 1.3 million subscriptions to the streaming service, Iker said, which the company is looking at. Previous “Deadpool” and “Planet of the Apes” ” Similar trends in movies.)
Disney’s most recent box office hit, Marvel’s “Deadpool & Wolverine,” was released in the current quarter.
Revenue for Disney’s sports business, which includes ESPN, rose 5% to about $4.5 billion, although the division’s operating income of $802 million fell 6%. Domestic ESPN ad revenue rose 17% year-on-year, but was not enough to offset a $314 million operating loss at Disney’s Star India business, which saw higher programming and production costs due to the timing of the ICC T20 Cricket World Cup.
