The Walt Disney Company’s trio of streaming television services have turned a profit for the first time in the company’s history.
Collectively, the three services — Disney Plus, Hulu and ESPN Plus — earned $47 million during the company’s third fiscal quarter (Q3, coincides with calendar Q2) of 2024. It marked a total reversal of the $512 million loss the streaming business logged during the same quarter last year.
Revenue from Disney’s direct to consumer business clocked in at $5.085 billion during the quarter, up 15 percent on a year-over basis. It was the highest-earning business segment among Disney’s television properties, with linear networks earning just $2.663 billion, or 7 percent lower compared to last year.
A decline in traditional advertising revenue was blamed for Disney’s sluggish linear TV business, which earned $2.1 billion in the domestic market and $518 million overseas. Domestic and international operations were both down compared to Q3 2023.
Disney said lower advertising revenue was partially offset in the domestic market by higher fees charged to cable and satellite companies for continued carriage of ABC, the Disney Channel, FX, National Geographic and other channels. But affiliate fee revenue — which was not reported as a separate data point — came in lower during the quarter due to higher churn among cable and satellite subscribers, which resulted in lower distribution fees. Disney also owns a stake in A+E Networks (which includes A&E, History Channel and Vice TV), which was impacted by higher churn and lower affiliate fee revenue as well.
The trend is not unique to Disney, and one reason why it and other media companies are increasingly focused on building out their direct-to-consumer streaming operations. The thinking is, as cable and satellite customers churn out, they will be attracted to comparatively lower-cost options offered by streaming services — and Disney has three of them.
Disney’s direct-to-consumer entertainment business — which includes Hulu and Disney Plus — logged a $19 million loss during the quarter, but the sports side of the business — which includes ESPN Plus and associated pay-per-view revenues — earned $66 million in profit, helping to swing the overall business segment to a $47 million gain during the quarter, Disney said.
Paid subscribers to Disney Plus in the United States and Canada rose 1 percent to 54.8 million customers. Overseas, Disney Plus reported a loss of around 100,000 subscribers to end Q3 with 63.5 million customers. Globally, Disney said its Disney Plus service has 118.3 million subscribers.
Hulu saw subscriber gains during the quarter as well, with the video on-demand version counting 46.7 million customers, or 2 percent more than Q3 2023. A version of Hulu that offers live television channels from Disney and other broadcasters lost around 100,000 subscribers to end the quarter with 4.4 million paying customers.
Moving forward, Disney says it plans to implement additional strategies to earn more customers and squeeze more cash out of existing subscribers. On Tuesday, the company announced plans to implement a price adjustment that will see most streaming customers pay a few dollars more for access to Disney Plus, Hulu or ESPN Plus, or $1-2 more if they take two or all three services through a bundle arrangement.
During a conference call with investors on Wednesday, Disney executives affirmed they are also implementing a crackdown on password-sharing between paying customers and freeloaders, similar to what peer services like Netflix have done, with the crackdown rolling out in September.
