• by Wayne Friedman , January 11, 2024

Although some progress has been made in trimming losses for its streaming/direct-to-consumer (D2C) business, one estimate says Disney’s overall results will still post a $2.5 billion loss for 2023.

And in a more troubling finding, MoffettNathanson Research says when comparing Disney's D2C performance to Netflix at the same point -- with revenue of over $20 billion -- Disney is still far behind from a trend perspective.

In 2019, Netflix had an annual revenue of $20.2 billion, with a $2.6 billion in positive cash flow (earnings before interest, taxes and depreciation) -- a profit margin of 13%.

Disney is projected to have a negative profit margin of 13% for 2023 on $19.9 billion in revenue -- slightly better than a year ago, when the margin was 19%.

Netflix also performed better, with a $10.82 average revenue per subscriber (ARPU) in 2019, compared to Disney at $8.35 for 2023.

One major factor in the difference between the two companies is the expenses Disney has incurred to quickly build its business, in contrast to where Netflix was in 2019. 

Netflix had more direct-acquired subscribers. Disney uses ore third-party streaming distributor, which drives cost higher.  

All in, total expenses (which including marketing) for Netflix in 2019 were $17.6 billion in 2019. For Disney in 2023, expenses are projected to be $22.4 billion. If Disney could have honed down expenses to those Netflix levels, that $3 billion difference would have put it in the black last year.

“Big picture, Disney’s cost base is $4.8 billion larger than Netflix at similar revenue levels which given Disney’s library, brand equity ability to window content and ownership of significant Media Networks to help promote their DTC platforms doesn’t make sense at face value," writes Michael Nathanson.