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Disney TV channels hit by cord-cutting, still profitable

The company saw its linear business bring in 7 percent less revenue during Q2 2023, but still posted a profit of $1.828 billion.

The company saw its linear business bring in 7 percent less revenue during Q2 2023, but still posted a profit of $1.828 billion.

A television studio used by Disney-owned ABC station KGO-TV in San Francisco. (Photo via Google Maps, Graphic by The Desk)
A television studio used by Disney-owned ABC station KGO-TV in San Francisco. (Photo via Google Maps, Graphic by The Desk)

The Walt Disney Company’s portfolio of domestic broadcast and cable television channels brought in less money during the company’s second financial quarter of the year compared to 2022, with the company attributing a slowdown in that part of the business to cord-cutting and a weaker ad market.

On Wednesday, the company revealed its broadcast and cable television sector earned $6.625 billion during Q2 2023, a 7 percent decline compared to the previous year. Domestic networks, which include ABC, Disney Channel ESPN, FX, Freeform and National Geographic, earned $5.6 billion in revenue, a 4 percent decline.

Executives attributed the revenue losses to higher programming costs, including a renewed deal to carry National Football League games on ESPN, as well as lower affiliate revenue. The lower affiliate revenue was blamed on an ongoing consumer trend of customers ditching expensive cable and satellite services for cheaper streaming options. Like other media companies, Disney charges cable and satellite companies a fee to carry their channels; those fees are passed on to consumers through their bills.

Related: Disney reports second quarter financial earnings for 2023

Disney said it has successfully negotiated higher carriage rates with some of its cable and satellite partners — not too long ago, the company reached a new deal with Dish Network that saw customers paying more for its satellite service and streamer Sling TV — but that the higher rates weren’t enough to offset a decline in cable and satellite customers during the quarter.

Revenue was also impacted by an ongoing softening of the advertising market, which has seen companies pull back on their marketing budgets amid higher inflation and fears of a looming recession. The weak ad market also impacted Disney’s overseas TV channels, which earned $1.1 billion in revenue, a year-over-year dip of 18 percent.

Despite lower revenue, Disney said its domestic channels continue to be profitable, with its broadcast and cable channels pulling in $1.568 billion in operating income, an increase of 33 percent. That income helped offset a $659 million loss in the company’s streaming portfolio, which includes Hulu, Disney Plus, ESPN and Hotstar. Factoring in Disney’s overseas channels, the linear TV segment brought in $1.828 billion in profit for the quarter, an increase of 35 percent.

Disclosure: The author of this story worked for the Disney-ABC Television Group in 2011.

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About the Author:

Matthew Keys

Matthew Keys is the publisher of The Desk and reports on the business and policy matters involving the broadcast television, streaming video and radio industries. He previously worked for Thomson Reuters, Disney-ABC, Tribune Broadcasting and McNaughton Newspapers. Matthew is based in Northern California, has won numerous awards in the field of journalism, and is a member of IRE (Investigative Reporters and Editors).