Disney’s losses from streaming narrowed in the last quarter

To understand the forces that have rocked the biggest media companies, look no further than Disney’s revenues. Streaming economics are improving – significantly. But not fast enough to offset the decline of traditional television, which is in free fall.

Disney said Wednesday that losses in its streaming business for the most recent quarter totaled $659 million, an improvement from a year earlier (and a huge improvement from the October to December period, when losses totaled $659 million). 1.1 billion). Streaming revenue was up 12 percent, reflecting a surge in revenue per paid Disney+ subscriber, a metric investors are watching closely.

The problem: Disney still relies on old-fashioned TV channels for a huge chunk of its profits — and those outlets are crippled by cable-cutting, the cost of sports programming, and advertiser pullbacks. Disney’s linear networks (ESPN, Disney Channel, ABC, National Geographic, FX) reported $1.8 billion in operating revenue, down 35 percent from a year earlier. Turnover fell by 7 percent.

Disney CEO Robert A. Iger called the decline of traditional television “a worrying circumstance” in an earnings-related conference call with analysts. Shares of Disney fell more than 4 percent in after-hours trading on Wednesday.

As part of its drive for streaming profitability, Disney announced that content from Hulu would be made available on Disney+ to subscribers of both services in the United States. Mr Iger said this “one app experience” would be rolled out by the end of the year. Hulu, which does not operate overseas, also continues as a standalone product.

Disney+ content is primarily aimed at children and families. The addition of more mainstream Hulu content would “increase engagement and increase our chances of serving digital ads — growing our advertising business,” Mr. Iger said.

Disney said it would raise the price for ad-free subscriptions to Disney+ later this year, in part to push more viewers to lower-cost subscriptions that allow advertising (which in turn could allow Disney to raise ad rates). Disney recently raised the ad-free price in December: Those subscriptions now cost $11, a 38 percent increase over what Disney previously charged. The ad-supported option costs $8.

Disney owns 67 percent of Hulu, with Comcast holding the balance. Under a 2019 deal, Disney has an upcoming opportunity to buy out Comcast. (Estimates start in the $9 billion range.) Mr. Iger indicated on Wednesday that Disney would like to close that deal.

“We’ve already had some conversations with them,” he said. “I can’t really say where they end up.” Mr. Iger began the conference call notably by congratulating Comcast, an arch-rival, on the success of its animated “Super Mario Bros. Movie,” which has grossed $1.2 billion worldwide.

Disney+’s subscriber base has declined over the past six months, in part because Disney has pulled away from costly subscriber acquisition efforts — marketing campaigns that try to convince people to subscribe. Disney+ now has about 158 ​​million subscribers worldwide, down 2 percent from December, with most of the loss coming from ultra-low priced subscriptions in India. Disney+ peaked in October with 164 million subscribers.

Disney had 231.3 million subscribers to Disney+, Hulu and ESPN+ in the quarter, up from 234.7 million in December.

Unlike most of its competitors, Disney has a safety net in the form of theme parks. Operating profit in the company’s Parks, Experiences and Products division jumped 22 percent to $2.2 billion as Disney resorts in Shanghai and Hong Kong finally began to recover from the pandemic. Disneyland Paris continued its surge in attendance, which began last summer with the opening of a Marvel-themed extension.

Visitor numbers also increased at Disney World in Florida and Disneyland in California, although higher costs – for example, the introduction of a new ‘Tron’-themed roller coaster – hurt profitability in Florida. Disney Cruise Line bookings have been strong, in part due to a recent expansion of its fleetthe company said.

It was Disney’s first full quarter under Mr. Iger’s second reign, who returned as CEO in November. He replaced Bob Chapek, who was ousted by the board after a series of blunders, including the company’s response to contentious Florida education legislation. The fallout from that issue has led to a legal battle with Governor Ron DeSantis over Disney World’s future expansion and oversight.

On Wednesday, Mr. Iger said the company was “looking at where it makes the most sense to direct future investment” for theme park construction, a clear reference to Florida’s gridlock. Disney said last month — before the deteriorating situation with Mr. DeSantis — it had earmarked $17 billion for Disney World expansion projects over the next decade.

When asked by analysts about the tense situation in Florida, Mr. Iger reiterated that Disney viewed it as unconstitutional retaliation for its views on education legislation.

As a whole, Disney generated revenue of $21.8 billion, up 13 percent from last year, slightly ahead of analysts’ forecasts. Disney reported earnings per share of 93 cents, excluding certain items affecting comparisons, in line with analyst expectations.

Disney is cutting about 7,000 jobs, or about 4 percent of the global total, as part of a $5.5 billion campaign to cut costs. There have been two rounds of layoffs so far; the final round is expected at the end of this month.

The company continues to put money into original Disney+ programming. The third season of “The Mandalorian” hit the service in March. Another lavish series set in the “Star Wars” universe, “Ahsoka,” is scheduled to launch on Disney+ this summer.

At the same time, however, Disney said it would begin removing some content from its streaming services, particularly in overseas markets where growth potential is limited. It did not preview the content. Because content costs are amortized over time, early removal would cost Disney up to $1.8 billion. But the move will save Disney money in the long run, as the company won’t have to pay residual fees (a type of royalty) to show creators.