Streaming Gains Push Disney Over Wall Street Earnings Bar, But Quarterly Report Notes $1B In Content And Restructuring Charges

Dade Hayes

8 November 2023 at 4:07 pm·3-min read

Disney opened a new corporate era with a mixed-to-positive batch of quarterly results, reporting better-than-expected revenue and earnings Wednesday but also more than $1 billion in charges.

Reporting numbers for the first time in the three newly defined divisions of Sports, Entertainment and Experiences, the media giant said total revenue in its fiscal fourth quarter perked up 5% from a year ago to $21.2 billion. Earnings per share of 82 cents more than doubled from the prior-year mark of 30 cents. The earnings figure handily beat Wall Street analysts’ forecasts, though the revenue line fell a bit short.

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Streaming paced the quarter, with Disney+ having its best performance in some time. The flagship streaming service added 7 million core subscribers during the quarter to reach 112.6 million, with the company crediting the debut of theatrical titles Elemental and Little Mermaid, as well as series Ahsoka and Moving. Including Disney+ Hotstar, the total subscriber count for Disney+ is now 150.2 million.

In its earnings release today, Disney said it still expects to hit the target it established in 2019 of attaining profitability in streaming by the end of fiscal 2024. It warned investors, though, that “progress may not look linear quarter to quarter.” Streaming losses during the September quarter went down to $387 million from losses of $1.41 billion in the same period in 2022.

Hulu essentially treaded water, adding about 300,000 live bundle subscribers but overall inching up to 48.5 million from 48.3 million in the most recent quarter. Disney last week said it would buy Comcast’s one-third stake in the streaming service, per the companies’ 2019 agreement giving Disney full operational control of Hulu. The deal terms stipulate a “floor” value of Hulu at $27.5 billion, meaning Disney will fork over more than $9 billion initially, with an arbitration process to determine the ultimate amount that changes hands.

ESPN’s results are now part of the newly created Sports division, which got off to an encouraging start as its own silo alongside Entertainment (which includes TV networks and the movie studio) and Experiences (home to theme parks and consumer products). ESPN revenue inched up 1% to $3.455 billion. Domestic operating income jumped 16% to $987 million, while internationally ESPN incurred an operating loss of $34 million, compared with a loss of $19 million in the year-ago quarter.

Linear networks revenue sagged 9% in the U.S., in part due to the Hollywood strikes.

The earnings release also revealed $1.02 billion in restructuring and impairment charges — $721 million of it for “goodwill impairments related to our general entertainment and international sports linear networks.” Another $137 million was “primarily for impairments of licensed content to align with the strategic change in our approach to content curation.”

Left unaddressed in the official release are a host of pressing issues that could factor into the company’s imminent conference call with analysts. CEO Bob Iger, who retook the top job nearly a year ago, is contending with the ongoing SAG-AFTRA strike; a brewing proxy battle; ongoing tensions with Florida officials, the task of shoring up ESPN and launching its stand-alone streaming version; and negotiations with Comcast over the price Disney will pay for Comcast’s one-third stake in Hulu.

Iger in recent months has presided over sweeping cutbacks across the company, shrinking the workforce by about 3%. In the earnings release, the company said it had upped its estimate of overall cost savings to be realized via the staff cuts and a host of other cost-reduction efforts. Originally aiming for $5.5 billion in savings, Disney now estimates the total will come in at $7.5 billion.

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