Disney's Streaming Hits Profit Milestone as Theme Parks Struggle with Rising Costs and Weak Demand

Disney's latest financial report offers a mixed bag—while the company’s streaming business turned its first profit, revenue from its theme parks fell short of expectations. For the third quarter of fiscal 2024 (natural year second quarter), Disney's revenue hit $23.16 billion, a 3.7% increase year-over-year, exceeding market expectations of $23.07 billion. The company returned to profitability, reporting a net income of $2.62 billion compared to a $460 million loss in the same period last year. Adjusted earnings per share rose to $1.39, outperforming the expected $1.19.

Disney’s streaming division posted a revenue of $6.38 billion for the third quarter, with an operating profit of $47 million. This marks the first time Disney's streaming business has turned a profit since Disney+ was launched in 2019, achieving this milestone one quarter ahead of schedule. The streaming segment includes services like Disney+, Hulu, and ESPN+. Over the past few years, Disney has repeatedly raised prices for its streaming services, which has helped boost subscription revenue. Recently, another round of price hikes was announced to take effect in October.

Despite the success in streaming, Disney’s theme park segment faced challenges. While revenue for the Parks, Experiences and Products division rose by 2% to $8.386 billion, operating profit fell by 3.3% to $2.22 billion. U.S. theme parks, in particular, struggled with rising costs and tepid consumer demand. The company has projected further difficulties ahead, expecting a revenue decline of several percentage points in the fourth quarter, citing ongoing weak demand in the U.S. market and the impact of the Paris Olympics on Disneyland Paris attendance.

The company's entertainment division also reported positive results, turning a profit of $254 million, compared to a $112 million loss in the same quarter last year. This marks the division’s first profitable quarter since early 2022.

Disney CEO Bob Iger, who returned to the company in 2022, has prioritized revitalizing the film business and achieving profitability in the streaming segment. Since the launch of Disney+ in 2019, Disney had incurred over $11 billion in losses from its streaming ventures due to high competition and escalating content costs.

Looking ahead, Disney predicts a modest increase in Disney Core+ subscribers in the fourth quarter. Despite relatively flat user growth, Disney continues to seek additional revenue from its existing user base through service price hikes and new content offerings. The company announced a 25% increase in subscription fees for Disney+ starting in October and plans to introduce more content to attract and retain subscribers.

In summary, while Disney has managed to turn the corner with its streaming business, its theme parks continue to grapple with operational challenges and fluctuating demand. How Disney navigates these opposing currents will be crucial for its financial health in the coming quarters.