The financial markets have reacted in dismay at the Walt Disney Companies’ financial report for the quarter, with shares tumbling 9.5 per cent at close on Tuesday.
This fall is in despite of Disney reporting it’s first profitable quarter for its Disney+ and Hulu streaming unit, which generated an operating profit of $47m in the quarter to the end of March, compared with a $587m loss a year earlier. It should be noted however that the companies’ total direct consumer business, which includes ESPN+ operated at a loss of $18m for the quarter. In total to date Disney has lost $11 billion since it entered the streaming business – making the switch to profitability an important moment in the companies history.
The streaming news came as Disney reported a net loss of $20m — owed largely to goodwill impairments – on $22.1b of revenue. This compares with net income of $1.3b on revenue of $21.8b in the same period a year ago. Disney’s adjusted earnings of $1.21 a share were up 30 per cent from a year ago and beat the $1.10 Wall Street had expected. It did not however reach market expectations for revenue.
Disney will be hoping that in the short to long term that a profitable Disney+ will fill much of the TV revenue void. Disney+ gained more than six million subscribers globally between January and March, excluding India and now has more than 117 million subscribers. So streaming continues to grow for the company, as linear TV networks decline.
Disney also plan a password crackdown, similar to that recently conducted by Netflix, which will start this summer in select countries, and roll out globally from September. This could if it falls the pattern for Netflix, help drive subscriber sign-ups in the months ahead.
Chief executive Bob Iger admitted during the earnings call that the company was “swinging back a bit to lean on sequels” after a period in which some of its new films failed to meet expectations.  “Given the competition in the overall movie market, there’s a lot of value in sequels obviously because they’re known and cost less in terms of marketing,” he said. Sequels for Moana, Inside Out, Planet of the Apes, and Deadpool are already on the release calendar.
He also plans to continue his cost cutting agenda, with cuts totalling at least $7.5 billion by the end of September.
