US Markets
Tuesday, May 7th, 2024 2:10 pm EDT
Key Points
- Disney’s streaming services (Disney+, Hulu, ESPN+) nearly broke even for the first time in the fiscal second quarter, losing only $18 million compared to a $659 million loss a year ago, signaling a pivotal shift towards streaming profitability.123
- Disney’s traditional linear TV business, once a cash cow, delivered dismal results, with ESPN’s operating income dropping 9% and other networks’ revenue falling 8% and operating income plunging 22%, underscoring the urgency of the streaming transition.123
- While streaming has not yet fully supplanted traditional TV as the primary revenue driver, Disney’s near-breakeven in streaming and the rapid decline of linear TV suggest this moment is imminent, prompting Disney to accelerate its streaming strategy.
For The Walt Disney Company, a pivotal moment has arrived after years of preparation and strategic shifts. In its fiscal second quarter earnings report, Disney’s streaming business nearly turned a profit for the first time, marking a significant milestone in the company’s transition towards a future centered around direct-to-consumer offerings.1234After incurring substantial losses in its streaming units over the past few years, Disney reported a combined loss of just $18 million across Disney+, Hulu, and ESPN+ in the second quarter. This represents a remarkable improvement from the $659 million loss recorded a year ago. Excluding ESPN+, Disney’s core streaming services, Disney+ and Hulu, actually generated a profit of $47 million, a stark contrast to the $587 million loss they suffered in the same period last year.1234This achievement underscores the long-held belief among major media companies that streaming will eventually supplant traditional cable TV as the primary revenue engine. Disney, along with rivals like Paramount Global, Warner Bros. Discovery, and Comcast’s NBCUniversal, have invested heavily in building their own subscription streaming platforms, betting on this inevitable shift in consumer behavior.1234While the streaming transition has yet to fully materialize, Disney’s second-quarter results suggest that the tipping point is rapidly approaching. Notably, the company’s traditional linear TV business, once a cash cow, delivered dismal performance during the quarter, further highlighting the urgency of the streaming pivot.1234For years, Disney fiercely protected its crown jewel, ESPN, from being offered outside the lucrative cable bundle. However, the company has finally acknowledged the changing landscape and will soon launch a standalone ESPN streaming service, allowing consumers to subscribe without a cable package. This move comes after years of declining cable subscribers and rising programming costs, which contributed to a 9% drop in ESPN’s operating income during the second quarter, despite a 3% increase in revenue.1234The decline in Disney’s other linear networks, including ABC, Disney Channel, FX, National Geographic, and Disney Junior, was even more pronounced. Revenue fell 8%, while operating income plummeted by a staggering 22%, further underscoring the urgency of the streaming transition.1234Disney has been preparing for this moment for years, and the company reiterated its expectation that streaming will become profitable in the fourth quarter and serve as a “meaningful future growth driver” with further improvements in profitability projected for fiscal 2025.1234The key question now is whether Disney’s investors will embrace this new reality. The company’s success in the streaming era will hinge on its execution in the coming years and the leadership of its yet-to-be-named successor to CEO Bob Iger, who has spearheaded Disney’s transformation.1234As traditional TV declines at an unprecedented pace, Disney finds itself at a crossroads, poised to capitalize on the streaming future it has meticulously prepared for. The company’s ability to navigate this transition successfully will determine its long-term prospects in an increasingly competitive and rapidly evolving media landscape.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/05/07/disney-streaming-results-improve-as-cable-tv-decays.html
