Tuesday, May 28, 2024

Disney Exceeds Analyst Expectations with Q2 Earnings as Streaming Business Nears Break-Even

Disney’s second-quarter fiscal report surpassed analyst predictions, marking a significant milestone as its streaming services nearly reached profitability. The entertainment giant’s total segment operating income surged by 17%, fueled by the remarkable performance of its streaming platforms, including Disney+ and Hulu.

Revenue for Disney’s entertainment streaming applications, namely Disney+ and Hulu, turned a profit for the first time this quarter. Combined with ESPN+, the streaming segment incurred a mere $18 million loss, significantly narrower than the $659 million loss reported in the same period last year.

Entertainment streaming revenue, excluding ESPN+, witnessed a substantial 13% increase, reaching $5.64 billion. Operating income soared to $47 million, a significant turnaround from the $587 million loss reported a year ago. Disney attributed this growth to a surge in Disney+ subscribers and higher average revenue per user.

Disney+ Core subscribers grew by over 6 million, reaching a global total of 117.6 million customers in the second quarter. Meanwhile, Hulu subscribers experienced a 1% increase, totaling 50.2 million, whereas ESPN+ subscribers slightly declined by 2%, amounting to 24.8 million.

Disney’s CEO, Bob Iger, highlighted the role of the Experiences segment and the streaming business in driving the company’s positive results. He expressed optimism about the profitability of the combined streaming businesses by Q4.

While Disney’s streaming business thrived, its traditional TV business faced challenges. Revenue from ESPN rose by 3% to $4.21 billion, but operating income decreased by 9% to $799 million. This decline was attributed to lower advertising revenue, a drop in cable subscribers, and increased programming costs associated with the College Football Playoff.

Linear network revenue across Disney’s portfolio, excluding ESPN, fell by 8% to $2.77 billion, with operating income plummeting by 22% to $752 million. Disney cited declining subscribers and reduced international affiliate fees due to contract rate decreases as contributing factors. Additionally, a decrease in advertising revenue due to lower average viewership impacted the segment.

Content sales, licensing, and other revenue, which includes box office earnings, fell by 40% in the quarter to $1.39 billion. This decline was primarily due to the absence of blockbuster movies, unlike the previous year, which benefited from the ongoing success of “Avatar: The Way of Water,” released in December 2022 and grossing over $2.3 billion globally.

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