Disney has been investing heavily in its streaming services over the past five years, and it seems that their efforts are finally paying off. In the second quarter, Disney nearly reached a profit in its streaming units, only losing $18 million between Disney+, Hulu, and ESPN+. This is a significant improvement from a loss of $659 million in the previous year. In fact, when excluding ESPN+, Disney+ and Hulu actually made a profit of $47 million in the quarter, a stark contrast to the $587 million loss in the second quarter of the previous year.

The traditional belief among major legacy media companies is that streaming will eventually surpass cable TV as the primary revenue generator. This paradigm shift has led companies like Disney, Paramount Global, Warner Bros. Discovery, and Comcast’s NBCUniversal to create their own subscription streaming services. While this transition has not fully materialized yet, the recent quarter results from Disney suggest that this moment is fast approaching.

The decline in Disney’s traditional linear TV results highlights the urgency of the shift to streaming. For years, Disney hesitated to make ESPN available outside of the cable bundle due to its profitability within the traditional TV ecosystem. However, with the launch of a skinnier bundle of linear cable channels with Warner Bros. Discovery and Fox, Disney is finally making the move to offer ESPN outside of traditional cable subscriptions. This transition aligns with Disney’s strategy to adapt to the changing landscape of media consumption.

The drop in cable subscribers and higher programming costs have contributed to the decline in operating income for Disney’s linear networks. While ESPN’s revenue saw a modest increase, operating income decreased by 9% in the second quarter. The decline in other linear networks, such as ABC, Disney Channel, FX, National Geographic, and Disney Junior, was even more significant. Revenue across Disney’s linear portfolio, excluding ESPN, fell by 8%, with operating income plummeting by 22%. This downward trend emphasizes the need for Disney to focus on its streaming services for future growth.

Disney’s long-term strategy revolves around the profitability of its streaming services. The company has projected that streaming will become profitable in the fourth quarter and will drive meaningful growth in fiscal 2025. This optimistic outlook hinges on the successful execution of Disney’s streaming initiatives in the coming years. The big question for the company is whether investors will embrace this new reality. The success of Disney’s streaming services will be crucial in determining the company’s future direction and the reception of its investors. Disney’s CEO, Bob Iger’s successor, will play a key role in shaping the company’s streaming strategy moving forward.


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