On Wednesday, Disney reported fiscal first-quarter earnings that were better on both the top and bottom lines, but they also showed the start of the anticipated decline in Disney+ streaming subscribers.
Disney+, the company’s flagship program, had a 1% drop in members, but the streaming division reported another quarter of profits. International platform subscriptions fell by about 2%, while domestic subscriptions rose by about 1%.
Disney anticipated a slight drop in subscribers for the December season, the company indicated in its fiscal fourth-quarter report in November. Disney informed investors on Wednesday that it anticipates a little drop in subscribers in the upcoming second quarter.
There are currently 124.6 million paid Disney+ subscriptions overall, up from 125.3 million at the conclusion of the company’s fiscal fourth quarter.During that time, the number of Hulu subscribers increased by 3% to 53.6 million.
Following a price hike for its services last year, streaming subscriber growth has slowed.According to the firm, the price increases caused Disney+’s average monthly income per paid member to rise by about 4% to $7.99.
During premarket trade, Disney’s stock was up around 2%.
According to LSEG, these are the differences between what Disney reported for the period ending December 28 and what Wall Street anticipated.
-
Earnings per share:
$1.76 adjusted vs. $1.45 expected -
Revenue:
$24.69 billion vs. $24.62 billion
In the same quarter last year, Disney’s net income climbed by about 23% to $2.64 billion, or $1.40 per share, from $2.15 billion, or $1.04 per share.Disney reported adjusted earnings of $1.76 per share after deducting one-time expenses such as restructuring charges and impairments associated with intangible Hulu assets.
Compared to the same period last year, when revenue was $23.55 billion, it climbed 4.8% to $24.69 billion.
The company’s sports, entertainment, and experience areas all witnessed increases in sales.
Revenue from its entertainment segment increased by 9% to $10.87 billion. Higher content sales and licensing drove a 95% increase in operating income for the segment, which includes its direct-to-consumer, linear, and content sales operations, to $1.7 billion during the quarter. Overall results continued to be negatively impacted by linear.
On Wednesday’s conference with investors, CEO Bob Iger maintained his optimism regarding the linear TV business, echoing remarks he made during the November earnings call.
They are not at all a burden. Disney is supporting and programming the networks so they can flow into streaming, so they are a real asset, Iger stated on Wednesday.
He stated that although he wouldn’t completely rule out the idea of future modifications to the TV networks, they wouldn’t happen right now.
“We genuinely feel good about the hand we have and the way we’re managing the streaming and linear businesses overall,” Iger stated.
Disney’s performance throughout the quarter was improved by its box office success.
The Thanksgiving weekend release of Moana 2 contributed to the film’s unprecedented success at the box office. The animated follow-up continued to do well at the box office into the new year, surpassing $1 billion on the weekend of Martin Luther King Jr. The business reported on Wednesday that Moana 2 had increased its content sales and licensing as well as other operating income.
With the aid of additional movies like Pixar’s Inside Out 2 and Marvel’s Deadpool & Wolverine, Disney dominated the box office in 2024 overall.
According to the corporation, the entertainment segment’s operating income is expected to grow by double digits in fiscal 2025, with an approximate $875 million increase in direct-to-consumer operating income.
Positive on parks
Revenue in its experiences division, which encompasses consumer goods, parks, cruises, and resorts, increased 3% over the quarter to $9.42 billion.
Sixty-eight percent of the division’s entire income, or $6.43 billion, came from domestic theme parks. Even while that revenue was 2% higher than it was in the same quarter last year, domestic operating income was negatively impacted by Hurricanes Milton and Helene, as well as drops in attendance and investments in Disney’s fleet of cruise ships.
At $1.98 billion for the quarter, the experiences division reported a 5% drop in operating income from domestic theme parks.
In fiscal 2025, Disney anticipates operating income growth in its experience sector of 6% to 8%.
In the wake of the post-Covid spike in attendance, theme parks in the United States have recently seen a dip in foot traffic.
In an interview with CNBC’s Squawk Box on Wednesday, Disney CFO Hugh Johnston stated that the company’s experiences division outperformed forecasts for the fiscal quarter.
Johnston stated on Wednesday that the customer is actually a little more powerful than we had anticipated. Customers are, in my opinion, simply highly value-focused, and if you can provide them with value, they’re prepared to pay the price.
Despite raising the pricing of its destinations, Disney’s parks recently achieved record profits and sales. The business is currently investing $60 billion in the industry over a ten-year period.
Sports scene
In sports, Disney’s ESPN reported operating profits of $228 million, up 15% from the previous year, and revenue growth of 8% year over year to $4.81 billion.
In fiscal 2025, the business anticipates a 13% increase in operating income for the whole sports segment, which includes ESPN and Star India.
Disney announced on Wednesday that the move of three College Football Playoff games from the first quarter into the second quarter and an additional NFL game during that time would negatively affect its sports segment operating incoming for the fiscal second quarter by approximately $100 million.
All of the Southeastern Conference college football games were televised by Disney’s networks this autumn.
Disney executives stated in a commentary release on Wednesday that the average number of viewers for 46 regular season college football games on Disney’s broadcaster, ABC, was 5.8 million, a 56% increase from the previous year. Disney’s advertising revenue this past season was boosted by the recent college football season.
Disney also stated that a penalty of about $50 million related to its exit from the Venu sports joint venture is included in the projection for unit operating income. Disney and Warner Bros. Discovery and Fox, its joint venture partners, canceled their plans to proceed with Venu, which was intended to be a streaming app that featured all of the live sports from its parent companies.
Following legal issues that delayed Venu’s launch last fall, the strategic modification was made.
Another aspect was the emergence of skinny bundles, which were reduced offerings from traditional pay TV providers that catered to news and sports networks. During the call with investors on Wednesday, Iger stated that Venu essentially seemed redundant to us in comparison to the slim bundle offerings.
After years of mostly remaining on the outside of the direct-to-consumer streaming market, Fox stated on Tuesday that it will proceed with its own streaming service in response to the Venu suspension. Executives at Fox also pointed out that thin bundles will help its network portfolio.
From combining its apps into Disney+ to investigating alternative possibilities for ESPN, like Venu, Disney has been investigating a number of strategies to expand its streaming selection.
According to corporate executives on Wednesday, the corporation’s top aim has been to develop its own direct-to-consumer streaming service for ESPN this autumn.
Iger noted sports betting and the potential for users to personalize the platforms to their liking. “We’re obviously leaning into the development of what is now called Flagship, which is basically ESPN with multiple, multiple elements to it,” he said on Wednesday.
Disclosure: Comcast is a co-owner of Hulu and the parent company of CNBC, NBCUniversal.
More from CNBC:
-
Private payrolls expanded by 183,000 in January, topping expectations, ADP says
-
National Women s Soccer League agrees to $5 million settlement over past mistreatment of players
-
Deranged’ and ‘problematic’: Bipartisan lawmakers bash Trump s Gaza proposal