The Walt Disney Co. saw its revenues and profits rise in its latest quarter, as it prepares to launch a new streaming push built around ESPN and Hulu.
The company reported its fiscal Q3 earnings Wednesday morning, reporting revenue of $23.7 billion, up 2 percent from a year ago, and segment operating income of $4.6 billion, up 8 percent from a year ago.
The company is set to put a fresh focus on ESPN, with the sports behemoth set to launch its first fully-featured streaming service in the coming weeks, and with the company inking a blockbuster deal with the NFL, which will give the league equity in the sports media giant.
On Wednesday morning, ESPN announced an expanded content deal with the NFL, including an extension of the NFL Draft, as well as a major new deal to stream WWE premium live events like WrestleMania and SummerSlam beginning next year.
Disney’s direct-to-consumer revenue increased by 6 percent to $6.2 billion, with operating income rising to $346 million. The company added 2.6 million Disney+ and Hulu subscribers, with essentially all that growth coming from international markets. Disney expects to add about 10 million subscribers this quarter, thanks largely to its new deal with Charter Communications, which bundles the product with its TV packages. Hulu will also be fully integrated into Disney+, with the standalone Hulu set to be sunsetted next year.
DTC was a main focus of the earnings call, with CEO Bob Iger touting what the company has planned.
“You’re going to end up with a far better consumer experience when those apps are combined by combining all of the program assets of both apps, both current apps, and obviously, with an improved consumer experience comes the ability to lower churn, which is obviously something that we’re very, very focused on and committed to doing. We obviously will deliver efficiencies,” Iger said. “In addition to that, as it relates to content spend, I’d say that from a domestic perspective, you shouldn’t expect that we need to increase the spend on content significantly. Where we believe we should be investing is to grow our international businesses.
“We’re also experimenting like crazy, where we’re basically trying different elements out on consumers and getting data back from them in order to figure out what works the best,” Iger continued.
Disney’s entertainment division had revenue of $10.7 billion, up 1 percent, and operating income of $1 billion, down 15 percent, due to declines in the linear TV networks, offset by the growth in streaming and some improvements in content licensing.
In the experiences division, the opening of Universal’s Epic Universe did not appear to phase Disney, with revenue surging 8 percent to $9.1 billion, and operating income rising by 13 percent to $2.5 billion. That growth was mostly domestic, with higher guest spending at U.S. parks, and an expansion of the Disney Cruise Line. Disney Cruise Line will launch its first ship in Singapore, the Disney Adventure, later this year.
“This will give us an opportunity to basically sail or float the Disney brand in all of its glory, into a region that we think is huge Disney brand affinity, and it creates a huge opportunity for us,” Iger said. “It’s a floating essentially ambassador for the Disney brand, because you’ve been on any one of our ships, particularly the new ones, we effectively use our IP built into the entire experience. And so I think this will create a great opportunity for us in Asia, but particularly in Southeast Asia.”
And in sports, revenue fell 5 percent to $4.3 billion, with operating income rising by 29 percent to $1 billion.
The NFL deal was top of mind on the earnings call, with Iger touting the economic potential it brings to the table:
“I should also note that from an economic perspective, even with this exchange of assets and the fact that the NFL obviously will be give paid a dividend from ESPN earnings, it will be accretive in the first year that after it closes,” Iger said. “And I think that’s significant, so that the revenue that we will derive from distributing the NFL Network and from distributing other NFL properties will obviously increase our revenue and increase our operating income for the ESPN business, that does not even factor in a potentially lowered churn rate for the ESPN app once we go to market and once the NFL games are all included, and obviously there’s advertising value as well.”
Disney also adjusted guidance for fiscal 2025, telling Wall Street that it now expected an adjusted EPS of $5.85, up from $5.75 last quarter, and targeting direct-to-consumer operating income of $1.3 billion.
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