Streaming Business Set Up By Disney is Evident Coming Close to Profits

Walt Disney Company

After five years of strategic investment, Disney came close to achieving profitability in its streaming units during the fiscal second quarter, reporting a modest loss of $18 million across Disney+, Hulu, and ESPN+. This marks a significant improvement from the $659 million loss recorded a year ago.

In a notable turn of events, Disney+ and Hulu actually turned a profit in the quarter, generating $47 million in earnings. This is in stark contrast to the $587 million loss incurred by these platforms during the same period last year.

Major legacy media companies, including Disney, Paramount Global, Warner Bros. Discovery, and Comcast’s NBCUniversal, have long held the belief that streaming will eventually supplant cable TV as the primary revenue driver.

Disney Plus Streaming Platform

This quarter’s results indicate that this long-awaited shift may finally be materializing. Moreover, the dismal performance of Disney’s traditional linear TV channels further underscores the urgency of this transition.

Disney’s decision to make ESPN available outside of the cable bundle reflects this evolving space. Historically, ESPN was exclusively offered within traditional cable packages due to its profitability in that context.

However, with the impending launch of a slimmer bundle of linear cable channels in collaboration with Warner Bros. Discovery and Fox, Disney is poised to extend ESPN’s reach beyond traditional cable for the first time.

Additionally, the upcoming launch of its flagship ESPN streaming service further underscores Disney’s commitment to adapting to changing consumer preferences.

Examining Disney’s second-quarter results, it’s evident why the company is pivoting towards streaming. While ESPN’s revenue saw a modest 3% increase to $4.21 billion, operating income declined by 9% to $799 million.

Disney Plus Streaming Platform

This decline is attributed to a drop in cable subscribers and increased programming costs related to events like the College Football Playoff. Although ESPN’s advertising revenue rose, it wasn’t enough to offset the decline in cable subscriptions.

The decline in revenue and operating income across Disney’s other linear networks, including ABC, Disney Channel, FX, National Geographic, and Disney Junior, paints a similar picture.

Linear network revenue, excluding ESPN, fell by 8% to $2.77 billion, with operating income plummeting by a substantial 22% to $752 million.

In response to these market shifts, Disney is doubling down on its streaming strategy. The company reaffirmed its expectation that streaming will turn profitable in the fourth quarter and anticipates it will be a significant growth driver in the future.

However, Disney’s streaming ambitions will ultimately succeed based on their execution in the years ahead and the leadership of its future CEO.

Nate O'Hara
Nathan is a seasoned commerce writer with a passion for unraveling the intricacies of the business world and distilling them into engaging narratives. During his academic journey, he delved deep into subjects like economics, marketing, and entrepreneurship, honing his analytical skills and developing a keen understanding of market dynamics.