Bob Iger, CEO of The Walt Disney Company, attends the nominees’ luncheon for the ninety fifth Academy Awards in Beverly Hills, California, USA on February 13, 2023.
Mario Anzuoni | Reuters
For Disneythe longer term is now.
It took five years, but Disney nearly turned a profit on its streaming units for the primary time in its second fiscal quarter, losing just $18 million between Disney+, Hulu and ESPN+. That’s an improvement from a lack of $659 million a yr ago.
Excluding ESPN+, Disney+ and Hulu actually made money this quarter – $47 million. Last yr, Disney+ and Hulu lost $587 million within the second quarter.
The thesis of each major legacy media company has been that streaming will eventually replace cable television as the first income. That’s why Disney, Paramount Global, Warner Bros. Discovery And ComcastNBCUniversal has built all of their very own subscription streaming services.
That hasn’t happened yet, but this quarter finally suggests that moment has arrived. It’s not only that Disney almost made money from streaming, but that the corporate’s traditional linear TV results have been terrible.
Disney held off on making ESPN available outside of the cable bundle for years since the sports channel was so lucrative throughout the walled garden of traditional television. These times are also almost over. Disney is launching Discovery and a thinner package of linear cable channels with Warner Bros Fox In the autumn, ESPN might be available outside of traditional cable television for the primary time. Next yr, Disney will launch its flagship streaming service ESPN, allowing consumers to subscribe to ESPN without cable.
Looking at Disney’s second-quarter results, it’s clear why the corporate finally pulled the plug on ESPN. While ESPN’s revenue rose 3% to $4.21 billion, operating income fell 9% to $799 million. A decline in cable subscribers and better programming costs resulting from the College Football Playoff led to the decline, Disney said. ESPN promoting increased to offset the decline in cable subscribers.
Even more worrisome were the declines at the corporate’s other linear networks, equivalent to ABC, Disney Channel, FX, National Geographic and Disney Junior. Linear network revenue across the Disney portfolio, excluding ESPN, fell 8% to $2.77 billion. Operating income fell by a whopping 22% to $752 million.
Disney shares fell nearly 8% in morning trading.
The latest reality
Simply put, traditional television is dying. The decline is going on faster than consumers have ever experienced.
Disney has been preparing for this moment for years. Streaming will develop into profitable within the fourth quarter, Disney reiterated, and “will be a significant future growth driver for the company, with further improvements in profitability in fiscal 2025,” the corporate said in its earnings release.
The big query for Disney is whether or not its investors will embrace this latest reality. This will rely on Disney’s streaming implementation and sure CEO Bob Iger’s yet-to-be-named successor in the approaching years.
Disclosure: Comcast’s NBCUniversal is the parent company of CNBC and co-owner of Hulu.
WATCH: Top analysts rate Disney’s earnings as streaming nearly breaks even this quarter
