How Disney Plans To Get Streaming Profitable In 2024 (2023)

How Disney Plans To Get Streaming Profitable In 2024 (1)


  • Disney lost $460 million in its third quarter but reported a profit of $2.7 billion through nine months of its fiscal 2023
  • ESPN is going fully direct-to-consumer in the near future
  • Analysts believe Disney is making the right moves by raising streaming prices and halting password sharing

The Walt Disney Co. is looking to get its streaming kingdom in order by hiking prices and stopping password sharing. The company wants to get its overall direct-to-consumer business profitable in 2024 and is willing to use ESPN to make it happen.

On Wednesday afternoon, Disney (NYSE: DIS) released the third quarter earnings report for its fiscal 2023, which revealed the Burbank, California, entertainment giant recorded a net loss of $460 million during the quarter, a massive drop from the $1.4 billion in net income it reported during the same period the prior year.

On the other hand, according to Disney's third quarter of its fiscal 2023 filing with the Securities and Exchange Commission, the company reported a net income of $2.696 billion through the first nine months of its 2023. That, however, is a drop from its tally of $3.299 billion through the same time last year.

Investors were buoyed by the earnings, sending the stock upward on Thursday. As of 2 p.m. Eastern Daylight Time, the price increased to $91.33 a share from Wednesday's closing price of $87.53. However, the share price remains far off from the more than $120 a share Disney stock traded at in August 2022, according to historic New York Stock Exchange figures.

In Wednesday's quarterly earnings call, CEO Bob Iger said Disney was "completely restructured" during his current, eight month tenure as the chief executive. Additionally, the company is pursuing a goal of saving more than $5.5 billion via "aggressive cost reductions."

Going forward, Iger said on the call, Disney will focus on studios, theme parks and its streaming service Disney+. The company is reportedly looking to sell some, or all, of its so-called linear television assets.

A significant portion of the quarterly loss could be tied to streaming, however. Analysts previously told International Business Times the company is simply spending more money than it is making on its service and it needs to raise prices or cut spending on streaming-exclusive content to get it into the black.

(Video) Bob Iger's most pressing task is getting Disney+ to profitability by 2024, says Variety's Brent Lang

According to its current earnings filing with the SEC, Disney lost $512 million on its DTC services, Disney+, ESPN+ and a portion of Hulu, during its third quarter. Nevertheless, that is a vast improvement over the $1.061 billion loss it reported in the same sector for the same portion of last year.

In the conference call, Iger said the company wants to get its DTC services into profitability by the end of next year. He said Disney will be hiking prices and cracking down on password sharing. Streaming leader Netflix Inc. (NASDAQ: NFLX) recently cut subscription sharing at the cost of some subscribers in a move that improved its own balance sheet.

Iger also said Disney is moving its ESPN properties further into the DTC fold. He said "taking our ESPN flagship channels direct to consumer is not a matter of if, but when."

ESPN also made waves on Tuesday by announcing Disney inked a $2 billion, 10-year deal with Penn Entertainment Inc. to rebrand Penn's sports betting services using the ESPN brand. Penn (NASDAQ: PENN) dumped sports, culture and entertainment media company Barstool Sports Inc. in favor of the Disney property.

The Wyomissing, Pennsylvania, entertainment company anticipates the move to create ESPN Bet will grant it between $500 million to $1 billion of annual earnings potential by using ESPN to promote the service.

Disney and Iger said little about the ongoing writers and actors strikes halting Hollywood.

The current SEC filing said work stoppages "impacted our productions and the pipeline for programming and theatrical releases."

"If either is prolonged, (it) would further undermine our ability to produce, distribute or license programming and theatrical releases, which could result in reduced revenue and have an adverse effect on our profitability," Disney said in the filing. "Resolution of disputes or negotiation of new agreements, including rate increases and other changes to employee benefits, has in the past increased our costs and may increase our costs in the future."

Generally, stock analysts were pleased with the report and said investors will likely keep a close eye on Disney's scheduled investor event in September.

(Video) How Disney+ Became a Streaming Service Heavyweight | WSJ

A team of analysts at Wells Fargo & Co. (NYSE: WFC) led by Steven Cahall, an equity analyst with Wells Fargo Securities LLC, said in a Wednesday note provided to IBT that they expect Disney will focus on: Explaining how its going to improve its overall content; sharing more about how it will bring DTC to a break even point; discussing its potential sale of linear television assets and a further explaining its plan to take ESPN fully DTC.

A team of analysts at Deutsche Bank Aktiengesellschaft (NYSE: DB) led by Bryan Kraft, a research analyst at Deutsche Bank Research, said in a Thursday research note provided to IBT that the ad-supported streaming platforms launched in December 2022 are boosting DTC revenue. Raising prices starting in September and halting password sharing will help Disney achieve its goals.

"While we've long thought tightening controls around unpaid password sharing would be part of the natural evolution of streaming services, this is the first time Disney has talked about it being a focus," the Deutsche Bank note said. "We believe that this will be another lever to improve monetization, grow subscribers, and increase DTC profit margin."

In a Thursday research note provided to IBT, a team of analysts at Truist Financial Corp. (NYSE: TFC) led by Matthew Thornton of Truist Securities said Disney's third quarter performance was better than expected. Truist's analysts expect Disney's stock price to get a boost after more details of its DTC plan are unveiled in September, too.

A team of Morgan Stanley (NYSE: MS) analysts led by Benjamin Swinburne, an equity analyst at Morgan Stanley & Co. LLC, said in a Thursday note provided to IBT that the activity of the theme parks in the U.S. and abroad shouldn't be ignored as they are carrying the company and will "for years to come."

"(Disney's) parks and experiences segment, which drives the majority of its earnings today and in the future, is a high return-on-capital growth business," the Morgan Stanley note said.

Furthermore, Morgan Stanley analysts believe Disney's media and intellectual property assets are both "under-earning and under-valued" and they predict the stock will rise as Disney cuts its spending. Offloading under-performing linear television assets will help it save money as well.

Morgan Stanley, Truist, Deutsche Bank and Wells Fargo all currently rate Disney stock as a buy.

A Wednesday note from KeyBanc Capital Markets Inc. provided to IBT argued for a more tempered outlook. The team of analysts led by Brandon Nispel of KeyBanc Capital Markets said the DTC price hike "will provide a meaningful headwind."

(Video) Disney Raises Disney+ Prices by 27% for Ad-Free Tier, Password Crackdown in 2024! No Apple Takeover

"We expect DTC (earnings) to continue to improve, but any rebound in (subscription) growth is likely to be short-lived, as the rapid increases in prices are unlikely to be met with the value needed to keep consumers," the KeyBanc note said.

Further, rating the stock as a hold, KeyBanc said Disney's DTC subscriber growth is actually stalling and isn not too much different from its competitors. The analysts also worry consumers won't pay up for a fully DTC ESPN, either.

"Structural changes in content distribution have resulted in (Disney) content sales segment business that is unlikely to make money for the foreseeable future," the KeyBanc note said. "Our worries in 2023 continue into the 2024 financial setup."

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© Copyright IBTimes 2023. All rights reserved.


How can Disney make streaming profitable? ›

Walt Disney Co. CEO Bob Iger vowed to make its streaming services profitable via a planned October price hike on its ad-free Disney+ and Hulu plans and a crackdown on password sharing expected to extend through next year. The increases will raise the monthly cost of ad-free Disney+ by $3, or roughly 27%, to almost $14.

How will Disney plus become profitable? ›

Disney laid out the profit plan for Disney+ streaming service on its investor call after reporting its most recent quarterly results, and it's likely not going to make its customers very happy. It entails cutting back on the content offered, selling more ads and charging higher subscription fees.

Why is Disney losing money streaming? ›

Disney+ lost roughly 11.7 million subscribers worldwide in the three months that ended July 1, for a new total of 146.1 million. All the decline came from a low-priced version of Disney+ in India. Last year, Disney lost a bid to renew the expensive rights to Indian Premier League cricket matches.

How much does Disney make from streaming? ›

Disney Plus annual revenue 2020 to 2022 ($bn)
YearRevenue ($bn)
May 24, 2023

How is streaming profitable? ›

Streaming services make money via paid user subscriptions, and in some cases, allow advertisers on their platforms.

What is the most profitable streaming service? ›

According to IndieWire, Netflix and Hulu are the only two major streaming services that made a profit by the end of 2022. By contrast, Peacock, Disney+, Max (formerly HBO Max), and Paramount+ reported billions of dollars in losses in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).

What is Disney's most profitable? ›

Disney's most profitable area

Disney's media and entertainment division generated a significant portion of its total revenue at 55 billion U.S. dollars in 2022. This segment includes television and cable channels, as well as streaming service Disney+, amongst others.

Is Disney plus making or losing money? ›

Disney's direct-to-consumer segment, which includes the flagship Disney+ streaming service, suffered a loss of $659 million in the just-ended fiscal second quarter, the company said . That was significantly lower than the $850.3 million that analysts projected and less than half what it was just two quarters ago.

What is the strategy behind Disney plus? ›

Disney CEO Bob Iger signalled to investors that the entertainment giant would be shifting its focus from purely chasing a growth in streaming subscriber numbers to trying to grow “quality” subs that are less sensitive to pricing adjustments.

Is Disney financially struggling? ›

It's been a rough few years for Disney (DIS 4.88%). Despite the stock market boom during the first half of the year, shares are trading near their 52-week lows, and the stock is below where it was before the pandemic even as the broad market has gained substantially since then.

Is Disney streaming losing customers? ›

Subscribers to Disney+ services, home to movies such as Toy Story, Monsters, Thor and Black Panther, fell to nearly 158 million from January to March, the second quarter of customer losses after a net loss of 2.4 million in the previous three months.

Why is Disney plus not streaming well? ›

Disney+ stores temporary data on your device to help with performance, but occasionally the cache can become corrupted, which then leads to buffering issues. The method to clear your cache depends on your device: Android: Go to Settings > Apps > Disney+ > Storage > Clear Cache and Clear Data.

How is Disney doing financially 2023? ›

BURBANK, Calif. – The Walt Disney Company today reported earnings for its third quarter and nine months ended July 1, 2023. Revenues for the quarter and nine months grew 4% and 8%, respectively.

Is Disney doing well financially? ›

–The Walt Disney Company (NYSE: DIS) today reported earnings for its second quarter ended April 1, 2023. Revenues for the quarter and six months grew 13% and 10%, respectively. Diluted earnings per share (EPS) from continuing operations for the quarter increased to $0.69 from $0.26 in the prior-year quarter.

Why did Disney lose 4 million subscribers? ›

Most of the defections came from the Disney+ Hotstar offering in India after it lost streaming rights to Indian Premier League cricket matches. Disney also shed 300,000 customers in the United States and Canada, where it raised prices last December.

What does Disney own for streaming services? ›

Streaming TV is the new way to watch content through a variety of devices. Streaming services owned by Disney include Hulu, ESPN+, and ABC+. Along with owning these networks they also have a controlling stake in Hulu as well as owning both A&E Networks with NBCUniversal and Vice Media.

Does Disney own any streaming services? ›

Disney+ is an American subscription video on-demand over-the-top streaming service owned and operated by the Disney Entertainment division of The Walt Disney Company.

What brings Disney the most revenue? ›

Disney's most profitable area

Disney's media and entertainment division generated a significant portion of its total revenue at 55 billion U.S. dollars in 2022. This segment includes television and cable channels, as well as streaming service Disney+, amongst others.

How does Disney make money from Disney Channel? ›

How does the Disney Channel make money? Cable operators pay the Disney Channel to broadcast it. It's part of what your cable fees pay for.


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