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Disney Struggles With Streaming Profitability
May 7, 2024
Disney’s recent financial report reveals a mixed bag of results, with a significant focus on the challenges of making its streaming services profitable. Despite some successes, the company’s stock took a hit in early trading, dropping nearly 10%.
In the second fiscal quarter, Disney’s direct-to-consumer (DTC) segment, encompassing platforms like Disney+ and Hulu, finally turned a profit, marking a notable turnaround from previous losses. However, expectations for the current quarter signal a potential downturn, particularly due to losses from Disney+ Hotstar in India.
While Disney’s overall streaming services are not yet fully profitable, there’s optimism that they will reach that milestone by the end of the year. Meanwhile, adjusted earnings for the quarter surpassed analyst expectations, and revenue met consensus estimates.
However, challenges persist, including an impairment charge of over $2 billion related to the merger of Star India with Reliance Industries. Analysts suggest that Disney’s cautious outlook for its theme parks and experiences business could dampen investor enthusiasm, particularly amidst concerns about post-COVID travel moderation and rising costs.
On a brighter note, Disney’s streaming business saw an uptick in subscriber additions, boosted by partnerships with companies like Charter. The company also witnessed an increase in average revenue per user, reflecting recent price adjustments and efforts to combat password sharing.
In contrast, ESPN experienced a decline in operating income, attributed to lower affiliate revenue and a drop in subscribers. Similar trends were observed in linear network revenue and operating income within the entertainment division.
Looking ahead, Disney is doubling down on sports streaming, with plans for joint ventures and expanded media rights deals with organizations like the NBA. These strategic moves reflect Disney’s efforts to navigate the evolving landscape of media consumption.
While the path to profitability in streaming remains uncertain, Disney’s commitment to innovation and adaptation underscores its resilience in an ever-changing market.
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