Disney's entertainment streaming business posts first-time profit
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Disney on Tuesday said Disney+ and Hulu combined were profitable last quarter, an update that should give investors confidence in its streaming strategy.
Why it matters: Streaming profits will be critical in offsetting steady declines in Disney's legacy entertainment business.
- Its full streaming portfolio, including ESPN+, is on track to be profitable by its fiscal fourth quarter ending Sept. 30.
- Revenues and operating income from Disney's entertainment linear networks declined by 8% and 22%, respectively, last quarter, due to advertising losses stemming from viewership declines.
- Revenues and profits from its division that includes theater ticket sales fell 40%, in part due to the lack of movie releases stemming from the writers and actors strikes last year.
Yes, but: Disney's full streaming segment still isn't profitable, but it's getting closer.
- Combined with ESPN+, Disney's direct-to-consumer division lost $18 million last quarter, which is much less than the $659 million it lost during the same period last year. (ESPN+ lost $65 million last quarter.)
- Disney said that despite "softer" entertainment streaming revenues anticipated next quarter, it still expects its combined streaming business to be profitable in the fourth fiscal quarter and to be a "meaningful future growth driver for the company."
Between the lines: Disney attributes its streaming revenue gains to subscriber additions and price hikes, which helped drive higher average revenue per user (ARPU) for Disney+.
- Disney+ grew its subscriber base by 6.3 million, bringing the total number of Disney+ subscribers (excluding Disney+ Hotstar subscribers) to 117.6 million last quarter.
- The company is also making progress on streaming advertising for Disney+, which has long been a staple of Hulu's streaming business. The firm now has 22.5 million subscribers to its ad-supported tier for Disney+, executives said on the company's earnings call.
Zoom out: Disney's parks and experiences division continues to be a growth driver for the company, along with streaming.
- Domestic parks and experiences grew by 7% last quarter while international parks and experiences revenue grew by 29%, thanks to higher spending at Hong Kong Disneyland.
- The company says it expects "robust" profits from that segment for the full fiscal year.
The big picture: In beating Wall Street estimates on top and bottom lines last quarter, Disney told investors it expects profits for the full fiscal year to surpass previous expectations.
