Disney streaming business reaches profitability ahead of schedule
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Disney's streaming services reached profitability last quarter, which was earlier than expected.
The big picture: The media and entertainment giant has ESPN+ to thank, as sports have become the only true reliable source of mass audience engagement.
- The milestone is also significant as the larger industry shifts away from obsessively counting new subscribers.
Zoom in: The House of Mouse this morning reported that it made $47 million in operating income in its Q3 from its direct-to-consumer and ESPN+ platforms combined.
- Without ESPN+, the division lost $19 million.
Zoom out: Those profits — although a huge turnaround from more than $1 billion in quarterly losses two years ago — are tiny compared to Disney's overall revenue of $23.2 billion for the quarter.
- "We've been talking a lot about adding the technology features that we need, to basically make it a higher-return, higher-margin business and a more successful business. And we're doing that right now," CEO Bob Iger told analysts this morning.
- One improvement he said Disney needed was "stronger recommendation engines."
What we're watching: Likely what will also help margins are price hikes and a crackdown on password sharing, which Iger said will start "in earnest" in September.
- "Every time we've taken a price increase, we've had only modest churn from that, nothing that we would consider significant," he said.
- He also said the company has not had any backlash to early password crackdown notifications.
- For context, Netflix's moves to limit password sharing led to a surge in new sign-ups.
