Old Hollywood is finally doing what Netflix has been doing for over a decade: make money with streaming.
With the exception of NBCUniversal, the largest traditional media companies reported profits from their direct-to-consumer businesses last quarter, led by Walt Disney, which earned $321 million from its online video division in the final months of its fiscal year.It was the second consecutive quarter of profitability for the unit that includes Disney+, Hulu and Espn+.
The profits of Disney’s direct-to-consumer division even surpassed the profits of its film division, which earned $3 billion in global ticket sales this summer thanks to box office hits Inside Out 2 and Deadpool & Wolverine.
In the last 12 months, Disney’s streaming revenue They surpassed the combined sales of theatrical films and conventional television.
“Disney is betting on streaming and is positioned for a digital future that mitigates the problems of traditional television,” Bloomberg Intelligence analyst Geetha Ranganathan said in a note on Thursday. “While this was costly ($2.5 billion in losses in fiscal 2023), it has become profitable, marking a turning point.”
This is just the beginning, according to the company, which now predicts $1 billion in streaming operating profits for the fiscal year that has just begun.
Price increases, higher advertising sales, crackdown on password sharingand continued cuts in film and television production will continue to increase profit margins, the company said.
Streaming now offers Disney a “fantastic future”said Hugh Johnston, the company’s chief financial officer, in an interview with Bloomberg TV.
That future includes the launch in fiscal 2025 of a new sports streaming operation, which the company has informally called Espn Flagship. To improve the technology behind its streaming business and drive more engagement, Disney’s entertainment division recently hired Adam Smith, a YouTube executive, as chief technology officer.
Bob Iger, Disney’s chief executive, said in a conference call with investors on Thursday that price increases on the ad-free versions of Disney+ and Hulu helped to attract subscribers to the company’s lower-priced but more profitable advertising-supported offerings.
According to Iger, approximately 37% of total subscriptions to Disney’s streaming services in the United States are supported by advertising, while worldwide that figure is 30%.
What Bloomberg Intelligence says:
“Disney is committed to streaming and is positioned for a digital future that mitigates the problems of traditional televisionsaid Geetha Ranganathan, senior media analyst.
Warner Bros Discovery, the parent company of the Max streaming service, kicked off the good news about streaming last week.
Chief Executive David Zaslav said in a call with investors that its direct-to-consumer division, which includes both Max and the cable network HBO, will continue to grow subscribers and profits in the current quarter, sending the stock up 12%.
Like Disney, Paramount Global also posted a second consecutive quarter of streaming profits, with hits like Yellowstone driving the expansion of the Paramount+ service overseas.
Iger charted a path to streaming profitability when he returned to the CEO role in November 2022, promising that the operation would break even by the end of fiscal 2024.
Since the launch of Disney+ in 2019, the business has lost more than $11 billionand Disney said Thursday that its operating margin on streaming won’t reach 10% until fiscal 2026. That’s well below what Netflix earns now.
Not all traditional media companies are covering their online streaming ambitions. Peacock, the online platform from Comcast’s NBCUniversal unit, lost US$436 million in the third quarter.
Even in the case of companies that are profiting from their Internet investments, The profits are not necessarily enough to offset the decline of traditional television.
Warner Bros. and Paramount have posted billions of dollars in losses reflecting the loss of value of their cable television networks, while Comcast is exploring the possibility of spinning off channels like USA.
According to Johnston, Disney’s chief financial officer, Disney is happy to maintain his company’s traditional television business as it offers a “natural cover” for the streaming unit. Last year, Iger suggested that the broadcast and cable networks could be sold as non-core assets, but he ultimately changed his mind.
On the call with investors, Iger said linear television provides the company and its advertisers with a “differentiated audience” for streaming thanks to live programming. “Basically, the combination of both is working for us,” he said.
