• by Wayne Friedman , February 8, 2024

Walt Disney made progress on the direct-to-consumer (D2C) front, trimming its operating losses by 86% to around $140 million in its most recent quarter for its entertainment D2C businesses -- which include Disney+ and Hulu.

In the year-ago period, Disney's D2C business posted around a $1 billion operating loss -- largely due to Disney+ cost issues. 

In addition, D2C revenue grew 10% over the previous quarter to $5.5 billion, and 15% versus the year-ago period, benefiting from higher consumer monthly prices -- both at Disney+ and Hulu.  

But at the same time, that consumer price hike resulted in more churn, with a decline in subscribers for its Disney+ service, which the company expected. 

Disney+ subscribers dropped by 1.3 million globally to 111.3 million, and U.S. and Canada subscribers sank by 400,000 to 46.1 million. International Disney+ business sank 900,000 to 65.2 million.

Although there was a price hike for Hulu's subscription video-on-demand service, total Hulu subscribers for all its options rose 1.2 million to 49.7 million (45.1 million for Hulu SVOD and 4.6 million for Hulu Live TV+SVOD).

ESPN revenues ticked up 1% to $4.1 billion the year-ago period, and operating income rose $300 million from a $38 million net loss in the year-ago period. Disney says this was due to a decrease in programming/production and the timing of the college football playoff games.

Disney's company-wide advertising revenues were down by 2.2% globally in the quarter and by 9.4% for the year to end calendar 2023 with $11.3 billion. 

While D2C advertising grew 12.5%, ESPN's ad revenue was 2% lower (due to the timing of the college football playoff games). Linear TV networks were off 21.5% due to lower impressions at ABC Television Network and less political advertising at its TV stations.

The continuing positive news for Disney's video entertainment business is that its linear TV networks posted $1.24 billion in operating income (down 7%), while direct to consumer was still at an operating loss ($138 million). Also entertainment content sales had a $224 million operating loss result.

Elaborating on earlier discussions of ESPN moving to streaming, Bob Iger, CEO of Walt Disney, now says ESPN will transition the big linear cable sports network as a stand-alone streaming option in the fall 2025. This news came a day after an announcement that ESPN, Fox, Warner Bros. Discovery would be offering all their linear TV sports channels available through streaming service co-owned by the three media companies.

Also during Iger's earnings phone call with analysts, he said Disney was buying a $1.5 billion stake in Epic Games, in an effort to form a partnership around the company's big Fortnite gaming platform.

Iger, from a press release said: “The new universe will offer a multitude of opportunities for consumers to play, watch, shop and engage with content, characters and stories from Disney, Pixar, Marvel, Star Wars, Avatar and more.”

In March, Iger said Disney+ will become the exclusive streaming home of Taylor Swift's big concert film, “Taylor Swift: The Eras Tour (Taylor's Version)”.

For the quarter, company-wide Disney revenues from all its businesses were flat at $23.55 billion with operating income (before taxes) 27% higher to $3.88 billion.