3 things we learned from Disney's latest earnings report
More than 6 million people subscribed to Disney+ in the past three months, helping Walt Disney Co. post a surprise profit in its on-demand video streaming division, executives with the entertainment giant said Tuesday.
The earnings boost comes after a rough 18 months at the House of Mouse. In early 2023, CEO Bob Iger announced that 7,000 jobs would be cut across the company as part of a broader plan to slash costs and stabilize the company financially.
At the same time, Disney found itself in a bitter political feud with Florida Gov. Ron DeSantis over who should govern a slice of land in Orlando that the company had staked out for its expanding footprint.
With those challenges now in the past, here are three things we learned from Disney's second-quarter earnings report.
Disney turned a profit on streaming for the first time
The company's direct-to-consumer business, which includes Disney+ and Hulu, posted $47 million in profit for the quarter, a sharp turnaround from its $587 million loss in the year-ago period. Revenue also showed solid growth, rising 13% to $5.64 billion.
"The big surprise of the day came on the streaming front, which finally managed to bring profits — way ahead of predictions — amid Hollywood's massive strike period," said Thomas Monteiro, senior analyst at Investing.com. "This indicates that perhaps the more global, low-production-cost Netflix-like model is probably the way to go in an operation that needs to rethink its growth expectations as a whole."
As of March, Disney+ subscriptions were up 6% to 117 million, while Hulu subscriptions grew 1% to 50 million.
"Looking at our company as a whole, it's clear that the turnaround and growth initiatives we set in motion last year have continued to yield positive results," CEO Bob Iger said in a statement.
Entertainment and media giants like Comcast-owned NBCUniversal, Warner Bros. Discovery and Paramount Global (the parent company of CBS News) have struggled to turn a profit on streaming given the hefty costs of producing content. For Disney, the challenge now will be to sustain momentum in streaming, with invigorating the business while containing costs a key priority for Iger since he re-took the helm of Disney in 2022.
Expect to see more sports content on Disney+
The 2024 Women's NCAA basketball tournament was a viewership bonanza for ESPN, Disney officials said Tuesday. still nearly 19 million viewers watching South Carolina battle Iowa in championship finale wasn't enough juice to boost the sports programming network into the black this quarter.
ESPN's profit fell 9% in the second quarter to $780 million, compared to $858 million a year ago. Revenue grew 4% to $3.8 billion. Disney said the loss stems in part from the network spending more money on production when it aired one additional college football championship game.
In an effort to boost ESPN's revenue, Disney executives said Tuesday that a sample version of its content from ESPN+ will be folded into what Disney+ subscribers can see starting later this year. Short snippets of live sports events and limited sports news will be used to appeal to the casual sports fan, the company said.
The theme parks are chugging along
With the pandemic in the rear-view mirror, Disney's global theme parks are flying high. Revenue at its U.S. parks — Walt Disney World in Orlando and Disneyland in Anaheim, California — rose 7%, while the overseas parks reported a 29% increase.
Disney executives acknowledged that the company has been wrestling with higher costs at its theme parks during the quarter due to inflation. In the U.S., that has been offset partly by increased guest spending due to higher ticket prices and hotel room rates.
Overseas, Hong Kong Disneyland benefited from the opening of World of Frozen, a section of the park that includes rides based on the popular "Frozen" movies, in November.
—The Associated Press contributed to this report.