Disney Excites with First Profit in Streaming Business

The American media giant Disney has reported a profit in its streaming division for the first time. However, this success was overshadowed by weaknesses in the parks division. A "moderate decline in consumer demand" towards the end of the quarter dampened the overall positive result. In the third fiscal quarter, Disney achieved an operating profit of $47 million in its Direct-to-Consumer (DTC) streaming business, which includes Disney+, Hulu, and ESPN+. During the same period last year, the company had reported a loss of $512 million. Disney had originally forecasted that it would break even in streaming by this quarter. Overall, Disney reported an adjusted profit of $1.39 per share for the third quarter, exceeding the expectations of Bloomberg analysts, who had predicted $1.19, and significantly above the $1.03 of the previous year's period. Revenue also managed to slightly surpass the consensus estimate of $23.1 billion, reaching $23.2 billion, and exceeding the $22.3 billion from the previous year. The company raised its forecast for adjusted annual growth to 30 percent, up from the previously expected 25 percent. In pre-market trading, Disney stock subsequently rose by up to 3 percent. The stock showed largely unchanged performance over the course of the year leading up to the reporting day. For the near future, Disney expects further improvement in profitability in the streaming sector, both in the DTC area, which recorded a loss of $19 million in the third quarter, and with ESPN+. "We remain optimistic about our progress with several components to improve margins in the coming years," the company commented. One such component will be another price increase for the services. On Tuesday, Disney announced that it would raise prices for Disney+ and Hulu again in October. In the third quarter, Disney saw a slight increase in Disney+ subscribers to 118.3 million from 117.6 million in the previous year. Analysts had expected the number of subscribers to remain largely stable. The average revenue per user (ARPU) fell by 3 percent to $7.74 for domestic Disney+ users, despite recent price increases and measures against password sharing. The parks division, on the other hand, disappointed with a 6 percent decline in operating profit to $1.35 billion. Disney warned that "moderate demand" could persist "for the next few quarters." The company cited declining demand at Disneyland Paris due to the Olympic Games and cyclical fluctuations in China, while demand for cruises remained "strong." In parallel, the negative trend in the linear business continued. Revenue in the U.S. linear networks declined by 7 percent, driven by a drop in advertising revenue and lower revenues from partner companies, as more and more consumers canceled traditional TV services. Operating profit in this segment fell by 1 percent. In contrast, ESPN recorded a 1 percent growth in operating profit due to higher advertising and subscription revenues. As early as February, Disney had announced an increased focus on sports streaming, including a partnership with Fox and Warner Bros. Discovery. An independent streaming service for ESPN is also planned and is set to launch in the fall of 2025. Disney also seems to be bouncing back in the cinema segment. Films like "Inside Out 2" and "Deadpool & Wolverine" had strong successes. Disney is on track to lead the cinema market in the second half of the year as well, with upcoming releases such as "Moana 2" and "Mufasa: The Lion King." Revenue from content sales and licensing fees thus rose to $245 million in the third quarter, after a loss of $112 million in the previous year.