Walt Disney Co, said continued heavy investment in its streaming business held its profit-making ability in check during its fiscal fourth quarter, part of the media giant’s ongoing effort to reshape its operations for a world increasingly dominated by broadband-delivered media.
The Burbank, CA owner of the ABC television network, the Pixar movie studio and the Disney+ and Hulu streaming hubs said Tuesday that net income from continuing operations was essentially flat, rising just 1% to $162 million, compared with $160 million in the year-earlier period. The results come after Disney saw an operating loss in its streaming operations of $1.5 billion — $800 million more than the year-earlier quarter. The company said the loss was due to a higher loss at Disney+ and a decrease in results at Hulu.
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Disney seems prepared to carry the losses in order to keep creating more streaming content. Disney CEO Bob Chapek cited a “strategic decision to invest heavily in creating incredible content and rolling out the service internationally,” in prepared remark, and said the Disney expects “our DTC operating losses to narrow going forward,” and that Disney+ reaching “profitability in fiscal 2024, assuming we do not see a meaningful shift in the economic climate”. The CEO suggested that price increases for Disney+ would be implemented in due course and suggested a new ad-supported tier for the service would help generate revenue.
Disney is just one of several traditional media companies vying to create a new flow of revenue from streaming, even as it hopes to maintain some cash flow from its traditional cable and broadcast TV asset, along with its theme parks and consumer product lines. Revenue in the quarter for Disney’s media and entertainment operations was off 3%, while its theme parks and products saw revenue rise 36%. The company cited increases in attendance at its parks and a greater number of cruises for the rise in revenue at the latter division.
During a call with investors Tuesday, Disney executives said the ad-supported tier for Disney+ had secured commitments from at least 100 advertisers, but suggested that launch would not produce meaningful financial impact until later in its fiscal 2023.
Executives also indicated that the company’s quest for profitability would require keeping an eye on costs. “We are actively evaluating our cost base,” said Christine McCarthy, Disney’s chief financial officer. “We are looking for meaningful efficiencies.”
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