Here’s a surprise: Disney’s media business isn’t weighing down the company anymore.
The primary Disney investor narrative since 2022 has been how streaming losses, combined with a declining traditional pay TV business and a string of box office failures, have been anchoring surging sales and profits at the company’s theme parks and resorts. The result has been a company whose shares have fallen about 24% in the past two years, while the S&P 500 has gained 28% in the same period.
The company’s second-quarter results suggest a shift is happening. Disney’s combined streaming businesses — Disney+, Hulu and ESPN+ — turned a quarterly profit for the first time ever, making $47 million. That’s a significant improvement from losing $512 million in the same quarter a year ago.
Disney’s theatrical unit is also on a hot streak. “Inside Out 2” became the highest-grossing animated film of all time in recent weeks. “Deadpool & Wolverine” has taken in $824 million after two weeks of global release. Disney has become the first studio in 2024 to top $3 billion in worldwide ticket sales.
Meanwhile, Disney saw a “moderation of consumer demand towards the end of [fiscal] Q3 that exceeded our previous expectations” for its theme parks division. That caused shares to slump about 3% in early trading.
Disney Chief Executive Officer Bob Iger said during his company’s earnings conference call that he expects the momentum for the media business will only gain steam. That’s music to the ears of Wall Street, which wants both growth and profitability.
“We feel very bullish about the future of this business,” Iger said in reference to streaming. “You can expect that it’s going to grow nicely in fiscal 2025.”
Iger referenced a planned crackdown on password sharing, which will begin “in earnest” in September, as a tool that will help generate new subscribers and added revenue for the company. A similar effort from Netflix has helped the world’s largest streamer add new customers during the past year.
Disney is also raising prices for its streaming services in mid-October. Most plans for Disney+, Hulu and ESPN+ will cost $1 to $2 more per month.
Iger rattled off a list of movie titles that Disney hasn’t yet released to emphasize the studio’s solid positioning for the rest of 2024 and beyond.
“Let me just read to you the movies that we’ll be making and releasing in the next almost two years,” Iger said. “We have ‘Moana,’ ‘Mufasa,’ ‘Captain America,’ ‘Snow White,’ ‘Thunderbolts,’ ‘Fantastic Four,’ ‘Zootopia,’ ‘Avatar,’ ‘Avengers,’ ‘Mandalorian’ and ‘Toy Story,’ just to name a few. When you think about not only the potential of those in box office but the potential of those to drive global streaming value, I think there’s a reason to be bullish about where we’re headed.”
Disney isn’t de-emphasizing the parks. The company said last year it plans to invest $60 billion in its theme parks and cruise lines in the next decade. But it’s undoubtedly healthier for the company to persuade investors that the media units aren’t weighing down the share price.
Disney shares dropped Wednesday, likely because investors were focused on the parks. The next step is for shares to rise during a quarterly earnings report because investors are excited about the media units.
