• by Wayne Friedman , October 11, 2023

Things will get worse for Walt Disney before they get better when it comes to profitability of its direct-to-consumer business, according to Guggenheim Securities.

Michael Morris, media analyst of Guggenheim Securities, now forecasts the company’s D2C business will post a net loss of $478 million for the company's fiscal year 2024. Previously it had projected next year would see a slight net income of $187 million for the big entertainment company.

This is largely due to “steeper growth in programming and marketing expenditures in early fiscal year 2024.”

However, Morris says there will be “improvement in segment profitability progression in the second half [of 2024]... exiting the year on a positive profit trajectory.” He did not provide specific financial details.

Guggenheim estimates, however, that Disney would see top-line growth for its direct-to-consumer (D2C) revenues next year, climbing 16% to $25.4 billion -- from an estimated $21.9 billion for fiscal year 2023.

Morris also projects next year’s D2C revenue projection could achieve near parity to the revenue from Disney’s linear TV networks ($25.7 billion).

Disney isn’t alone with its slow profitability pursuit for its D2C businesses. Many legacy media companies have had similar struggles. 

Recently many have announced monthly consumer price increases, as well as looking for ways to slow down accelerating streaming production costs.

Ampere Analysis forecasts 2023 production costs among six major companies -- Netflix, Amazon Prime Video, Disney+, Apple TV+, Paramount+ and Max/HBO Max — will be down 7% from the year before to $42 billion for original and acquired film and TV content.

As has been previously announced, Disney will have a new “segmentation” structure, with the company now comprising  three business groups: Disney Entertainment, ESPN, and Disney Parks, Experiences and Products.