Disney may have faced more questions than any other major media conglomerate for its quarterly earnings report, with activist investor Nelson Peltz quietly planning his next move and Wall Street concerns touching nearly every part of the business, from the money-losing streaming arm to its long prosperous but now struggling linear TV channels.
Thursday’s earnings report proved a mixed bag. Some results showed reason for optimism, but long-term concerns will continue to plague Disney until a succession plan is in place for Bob Iger and the company decides on longer-term plans for ESPN and whether to sell off other parts of its business.
Speaking to investors on a conference call, Iger sought to reassure them that while the company knows it has work to do, it’s headed in the right direction. “Results this quarter speak volumes about the underlying strength of our company and the remarkable amount of work we have accomplished this past year,” Iger said. “Our new structure also enabled us to greatly enhance their effectiveness, particularly in streaming, where we’ve created a more unified, cohesive, highly coordinated approach to marketing, pricing and programming.
“This has helped us improve operating results of our combined streaming businesses by approximately $1.4 billion from fiscal 2022 to fiscal 2023. And we remain confident that we will achieve profitability in q4 of fiscal 2024.”
Iger also noted that the company has reduced costs by $7.5 billion this year, way more than the $5.5 billion Disney had been targeting. Acting chief financial officer Kevin Lansberry said more than 8,000 roles have been eliminated across the company. Currently, Disney does not plan additional large-scale job reductions, he said.
Disney+ Gains Subscribers While Disney+ Hotstar Loses Them
A major concern for traditional media companies has been the ability to turn a profit on streaming. Disney and rivals Paramount and Comcast are all struggling with streaming losses, while Warner Bros. Discovery crowed about managing a $111 million gain in fourth quarter.
Iger said Disney anticipates streaming will achieve profitability in fiscal fourth quarter next year, though he warned that the progress won’t be visible from quarter to quarter. Launching the new ad tier internationally, price increases instituted earlier this year to the basic Disney+, and continued subscriber growth will fuel that anticipated profitability. Ad-supported Disney+ subscriptions were up 2 million in the quarter.
But subscribers to the Indian version, Disney+ Hotstar, continued to decline, albeit more slowly than the previous two quarters. Hotstar fell from 40.4 million to 37.6 million subscribers, a 7% drop—not nearly as bad as the 24% drop in the previous quarter.
The declines were sparked when Hotstar lost streaming rights to a popular cricket league. Disney has decisions to make about its strategy in India going forward.
Hulu Becoming A Disney Property
Disney said earlier this month it will purchase Comcast’s 33% share in Hulu, taking over total ownership of the platform. Iger talked up the potential for the service, which saw a slight gain for combined streaming-only and Hulu-plus-live-TV subscribers, to 48.5 million.
A beta Hulu-Disney+ app will launch in December, Iger said.
Linear TV Declines
The Hollywood actors’ strike has impacted linear TV advertising at every major media conglomerate, with scripted content on hold until the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) has reached a deal with producers. The lack of fresh content has impacted viewership.
The release noted the decrease in advertising revenue came primarily from ABC and the owned TV stations. “Lower network advertising revenue was attributable to fewer impressions from lower average viewership. The decrease at the owned TV stations was due to lower political advertising revenue,” said the release.
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