Disney reports streaming profit but parks under strain / Photo: Chris DELMAS - AFP/File
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Disney reports streaming profit but parks under strain
Disney reported Wednesday better revenues than anticipated in the most recent quarter, atop a first profit in its streaming business, but its theme parks are coming under pressure.
The mixed picture drove its shares down 3.3 percent around 10 minutes into trading.
The company saw revenues of $23.2 billion, beating projections of $23.1 billion according to analysts polled by FactSet, while overall profits reached $2.6 billion.
"This was a strong quarter for Disney, driven by excellent results in our Entertainment segment both at the box office and in DTC (direct-to-consumer)," said Disney chief executive officer Bob Iger in a statement.
He added that this came "as we achieved profitability across our combined streaming businesses for the first time and a quarter ahead of our previous guidance."
Its streaming unit, which includes Disney+, Hulu and ESPN+, reported an operating income of $47 million.
Disney said it is still "on track for the profitability of our combined streaming businesses to improve" in the fourth quarter, adding that it is optimistic about its trajectory.
- 'Higher costs' -
But the company's theme parks came under stress in the quarter, with lower operating income domestically.
Disney said it has been squeezed by "higher costs driven by inflation, increased technology spending and new guest offerings."
It expects that the third-quarter demand slowdown seen for its US businesses -- under the experiences segment -- could impact the next few quarters as well.
And operating income in the upcoming fourth quarter could slip too.
Disney said it expects its fourth quarter experiences segment operating income to "decline by mid single digits versus the prior year."
This would partly reflect a return to regular consumer travel at Disneyland Paris after the Olympics, alongside "softening" demand in China.
"We expect to see a flattish revenue number" in the fourth quarter for the experiences segment, said Disney chief financial officer Hugh Johnston on an earnings call.
But he described the situation as a "slowdown that's being more than offset by the entertainment business."
- Film boost -
Disney's financial results were given a boost from "Inside Out 2," which became the highest-grossing animated film of all time.
This drove strength in areas like content sales and licensing, as well as Disney+ sign-ups.
The company said it expects core Disney+ subscribers to "grow modestly" in the upcoming quarter.
Disney's results came a day after it announced a hike to its streaming prices.
On whether price increases would encounter consumer pushback, Iger told the earnings call that the company has "pricing leverage" given its consumption growth and the popularity of Disney's offerings.
"Every time we've taken a price increase, we've had only modest churn from that," he said. "The goal is to grow engagement on the platform."
The company is among the media giants shifting towards streaming from more traditional avenues such as broadcast as well as cable television.
Competitors like Netflix and Warner Bros Discovery's Max also previously unveiled plans to lift costs.
L.Bernardi--IM
