A scene from the Disney and Pixar film “Inside Out 2.”
Sponsored by: 2024 Disney | Pixar
Amazing fact: DisneyThe media business is no longer a burden to the company.
A key argument for Disney investors going forward into 2022 is that streaming losses, combined with a declining traditional pay-TV business and a string of box office slump, are fueling soaring sales and profits at the company’s theme parks and resorts. As a result, the company’s shares have fallen about 24% over the past two years, while the S&P 500 has risen 28% over the same period.
The company’s second-quarter results suggest that change is afoot: Disney’s combined streaming businesses (Disney+, Hulu, and ESPN+) posted a quarterly profit of $47 million for the first time, a marked improvement from a loss of $512 million in the same period last year.
Disney’s theatrical division is also doing well. Inside Out 2 has become the highest-grossing animated movie of all time in recent weeks, and Deadpool & Wolverine has grossed $824 million in its first two weeks of global release. Disney is set to become the first studio to surpass $3 billion in worldwide ticket sales in 2024.
Meanwhile, Disney predicted that consumer demand would moderate toward the end of the year. [fiscal] The company said its theme park division’s third-quarter results “exceeded previous expectations,” sending its shares down about 3% at the start of trading.
Disney CEO Bob Iger said on the company’s earnings conference call that he expects momentum in the media business to continue to grow, which is good news for Wall Street, which is looking for both growth and profitability.
“I’m very optimistic about the future of this business,” Iger said of streaming, “and I expect it to grow at a healthy clip through fiscal 2025.”
Iger pointed to a crackdown on password sharing that will begin “in earnest” in September and said it would help the company attract new subscribers and increase revenue. Netflix It has helped the world’s biggest streamer gain new customers over the past year.
Disney will also be increasing the prices of its streaming services in mid-October, with most plans for Disney+, Hulu, and ESPN+ increasing by $1-2 per month.
Iger listed off a slate of movies that Disney has yet to release, underscoring the studio’s strong position beyond 2024.
“Let me tell you about the movies that are coming out over the next couple of years,” Iger said. “Moana, Mufasa, Captain America, Snow White, Thunderbolts, Fantastic Four, Zootopia, Avatar, The Avengers, The Mandalorian, Toy Story, just to name a few. Given their potential to drive not just box office but global streaming value, I think there’s reason to be bullish about where we’re headed.”
Disney isn’t neglecting its theme parks — the company said last year it plans to invest $60 billion in them and cruise lines over the next decade — but it would surely be healthier for the company to convince investors that its media division isn’t dragging down its stock price.
Disney shares fell on Wednesday, likely as investors were focused on the theme parks. The next step is for the stock to rise when the company reports quarterly earnings as investors pin their hopes on the media division.
WATCH: Watch CNBC’s full post-earnings interview with Disney CFO Hugh Johnson
