Disney’s streaming business turns profitable in first financial report since Iger challenge

Walt Disney Co. fell into the red in the second quarter due to restructuring and impairment charges, but adjusted profit exceeded expectations and its streaming business was profitable. Theme parks also continue to perform well, and the company has raised its outlook for this year.

Disney on Tuesday said it expects its overall streaming business to slow this quarter due to the impact of its platform Disney Hotstar in India, but the combined streaming business will be profitable in the fourth quarter and is meaningful for India. He said he expects this to become a driving force for future growth. We aim to further improve profitability towards fiscal 2025.

Disney and Hulu, quarterly operating income was $47 million, compared with a loss of $587 million in the year-ago period. Sales increased 13% to $5.64 billion.

For the combined streaming business, which includes Disney , Hulu and ESPN , second-quarter operating loss narrowed from $659 million to $18 million, with revenue of $5.51 billion to $6.19 billion. Improved to $.

Disney core subscribers grew more than 6% in the second quarter.

But Disney’s improving situation in streaming comes with the decline of its cable business. Sales in this sector fell by 8% in the most recent quarter.

“Looking at our company as a whole, it is clear that the turnaround and growth efforts we began last year continue to deliver positive results,” Iger said in a prepared statement.

Iger said on Disney’s conference call that the company plans to add an ESPN tab to Disney by the end of the year, a move it previously made with Hulu. This will give U.S. subscribers access to select live sports and studio programming within the Disney app.

ESPN, Fox and Warner Bros. Discovery in February announced plans to launch a sports streaming platform this fall that will include services from at least 15 networks and all four major professional sports leagues.

Iger also said the company will start cracking down on password sharing for streaming services in some markets next month, and will expand the crackdown globally in September.

Iger said that while Disney has high-quality streaming content, the company must now focus on building technology similar to what rivals prefer. Netflix I’ve done it. Efforts such as crackdowns on passwords are expected to improve profits.

This is the first financial report since shareholders last month rejected an effort by activist investor Nelson Peltz to win a seat on the company’s board, seeking to revitalize the company after a difficult period. He firmly supports Mr. Iger.

Thomas Monteiro, senior analyst at Investing.com, said that while some Disney investors may have expected more from the quarterly report, “the company is essentially a more conservative core company.” “We put business operations back into the business model.”

Monteiro was focused on the company’s efforts to return its streaming division to profitability.

“The big surprise of the day came on the streaming side, which ended up being more profitable than expected during a period of massive Hollywood strikes,” Monteiro said. “This suggests that a more global, lower production cost, Netflix-like model is probably the way to go for a business that needs to rethink its overall growth expectations.”

Disney reported a 7% increase in domestic theme park revenue and a 29% increase in international theme park revenue.

However, Disney acknowledged that it struggled with rising costs at its theme parks during the quarter due to inflation.

The company said guest spending increased at Walt Disney World due to higher ticket prices, while guest spending at Disneyland increased due to increased ticket prices and hotel room rates.

Overseas, Hong Kong Disneyland benefited from the opening in November of Frozen World, a section of the park that includes rides themed after the popular movie Frozen.

Like many tourist destinations, Disney continues to adapt to post-pandemic travel.

“Consumer travel continues to be at record numbers and demand remains healthy, but globally, we are seeing a post-COVID travel peak,” Chief Financial Officer Hugh Johnston said on a conference call. “There is evidence that the situation is being eased,” he said.

For the period ended March 30, Disney suffered a loss of $20 million, or one penny per share. That compares to profit of $1.27 billion, or 69 cents per share, a year ago.

Restructuring and impairment charges jumped to $2.05 billion from $152 million in the same period last year.

Adjusted earnings, excluding fees and other charges, came to $1.21 per share, easily exceeding the $1.12 per share expected by analysts surveyed by Zacks Investment Research.

Disney announced that based on its second quarter results, it has set a full-year adjusted earnings per share growth target of 25%. Previous expectations were for growth to be at least 20%.

The Burbank, Calif., company’s revenue rose to $22.08 billion from $21.82 billion a year earlier, but was slightly below Wall Street’s estimate of $22.13 billion.

Content sales and licensing revenue fell 40% as Disney did not release any significant movie titles in the second quarter compared to the same period last year, which included the release of “Ant-Man and the Wasp: Quantumia.” The continued performance of “Avatar: The Way of Water,” which was released in December 2022, also contributed to the results for the same period last year.

Shares fell more than 8% in morning trading.

Walt Disney Co. announced in February that it was implementing “significant cost savings,” reducing selling, general and other operating expenses by $500 million in the first quarter. The company will cut thousands of jobs in 2023.

In March, allies of Gov. Ron DeSantis and Disney reached a settlement agreement in a state court battle over how Walt Disney World should be developed following the governor’s takeover of the theme park and resort government. Reached.

Last month, character performers at California’s Disneyland and the union that organizes them, the Actors Equity Association, announced they had filed a petition seeking union recognition.