The Walt Disney Company produced a surprise yesterday posting good financial results with its streaming services being the unexpected star. As Netflix, it looks like the entertainment giant might have found the right recipe to bring new clients on its platforms. Investors reacted and the company’s stock price rose 6% in one day.
The Entertainment segment, which includes Disney+ and Hulu, reported an operating profit of $253 million, soaring well past Wall Street’s expectations of $131 million. Also, last year, in the same quarter this segment had posted a loss of over $420 million. At its peak in the similar quarter of 2022 the losses were a staggering $1.5 billion. Perhaps more importantly, Disney says that it expects profitability to more than triple to $875 million in 2025.
To put things into context, Disney has three big segments – Entertainment, Sports and Parks and Experiences. Across all segments the company has over 22.5 billion dollars in revenue this quarter. The largest one by revenue is Entertainment that includes the linear networks with TV channels, the direct-to-consumer streaming services that includes Disney + and Hulu and the content sales and licensing with Marvel Studios, Pixar and LucasFilm responsible for the Star Wars universe.
It accounted for about 47% of the Q3 revenue. The next one by revenue is the experiences segment that includes the Parks and Experiences and Consumer products. This was about 36% and the last one – sports – includes the ESPN network and ESPN+ service, which generated about 17% of total revenues.
But not all segments performed equally best. While entertainment was up 14% year on year, Parks and Experiences segment rose only 1% and Sports were flat. The good performance of the entertainment line of business was due to the streaming services and content sales licensing while the traditional linear networks revenue dropped 6% compared to the same quarter of last year.
This is showing a continuation of the viewers’ shift from traditional ways to consume content while watching TV to on-demand behavior.
Like Netflix, Disney has been searching for the perfect entertainment recipe. And this quarter shows that it might have found it. Disney+ number of subscribers increased by 4.5 million and Hulu (available only in the US) has seen another 0.9 million new subscribers. It is an impressive result as not so long ago, according to a survey in the US, respondents said that if higher price or stricter password sharing rules were enforced the most likely streaming services to cancel were Disney + followed by Hulu and ESPN+, all belonging to The Walt Disney Company. Netflix was next and Amazon Prime Video followed.
Another star of this earnings report was Content Sales and Licensing which include movie distribution, which showed a 39% year-on-year increase due to the very strong performance of the animation movie ”Inside Out 2” which grossed $1.05 billion as well as ”Deadpool & Wolverine” motion picture that grossed over $1.3 billion globally. Disney hopes to continue the winning streak in the last quarter of this year when several movies will hit the theaters, including the animated movie “Moana 2” at the end of November and the dark comedy “Nightbitch” starring Amy Adams at the beginning of December.
Another Disney animated movie “Mufasa: The Lion King” is dropping just in time for the Christmas vacation. Starting Christmas Day, music lovers might want to see the young BoB Dylan biopic drama “A Complete Unknown” starring Timothée Chalamet and Edward Norton.
Investors reacted very well to this latest earnings report, with the stock price of the company increasing by over 6% yesterday. But in the last 5 years the company’s stock lost almost 25% of its value so investors who bought Disney at the end of 2019 are not out of the woods yet. Individual investors have a keen interest in the evolution of Disney as at the end of last quarter it was the 14th most held stock by global investors and 17th by the Romanian individual investors on the eToro platform.
