Disney nears tipping point as streaming profits start to offset cable decline
By Aditya Soni and Jaspreet Singh
Nov 15 (Reuters) - Bob Iger returned to Walt DisneyDIS.N as CEO in 2022 with a bold promise of making streaming profitable.
The latest quarterly results have shown signs of a turnaround at the storied media company, suggesting that Iger may be getting the House of Mickey Mouse in order by focusing on its streaming business.
Disney on Thursday reported its second straight quarterly profit for the streaming business, riding on cost-cutting measures and a 4.4 million jump in subscribers after it started cracking down on password-sharing by users.
Its $253 million operating profit for the streaming business in the fourth quarter nearly offset the $307 million that its traditional television business shed in operating income.
The hope is that Disney's streaming business will start to do more "heavy lifting" as it improves and linear television declines, said Ben Barringer, technology analyst at Quilter Cheviot.
"It has the tech and the product in Disney+, it now just needs to utilize it in the right way to drive profit growth and challenge the other streaming giants," he added.
The company begancracking down on password-sharing in June, following in the footsteps of streaming giant Netflix NFLX.O, betting it would lead to a jump in subscriber numbers and higher revenue.
"The right way to think about Disney is to add together the shrinking linear TV business and the rapidly growing direct-to-consumer business, because Disney is hedged," Needham & Co senior research analyst Laura Martin said.
"Disney has reached the cross over point," Martin added.
The results show that a turnaround started by Iger was paying off. Since he returned, Disney has cut back on original content for its streaming service after a spending spree under predecessor Bob Chapek that led to streaming quarterly losses of $1.5 billion in November 2022.
Since last year, Disney has been consistently raising prices for Disney+ in an attempt to boost margins, with the most recent one having come into effect in October.
The company continues to produce original programs such as "Only Murders in the Building" for Hulu and "Agatha All Along" for Disney+, but it also relies on new film releases to spur viewership of related content.
For instance, the release of "Deadpool & Wolverine" and Pixar Animation's "Inside Out 2" prompted users to watch older movies in the franchise this year, company executives said.
"Theatrical film is the engine behind its powerful flywheel and continued success at the box office will help translate to continued streaming engagement," said Wade Payson-Denney, media analyst at Parrot Analytics.
Reporting by Aditya Soni, Jaspreet Singh, Zaheer Kachwala and Deborah Sophia in Bengaluru; Editing by Anil D'Silva
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
