Opinion: Disney is making progress toward its main goals and is ready to pull another lever.
The Walt Disney Co. said in its earnings report Wednesday that it has made major strides in reducing losses from its streaming business, with Chief Executive Bob Iger continuing his efforts to turn the media giant’s fortunes around: cracking down on password sharing Another tool has been touted to help you do this.
As the number of activist investors grows, Disney DIS
It reported better-than-expected results for its fiscal first quarter, including a smaller-than-expected loss in its streaming business. Losses from streaming, also known as direct-to-consumer units, were $138 million, down from a loss of $984 million a year ago, and analysts had expected a loss of $419 million, according to FactSet.
Disney Chief Financial Officer Hugh Johnston also surprised analysts with his forecast for the business’s margins, reiterating the company’s plans to achieve streaming profitability in the fiscal fourth quarter. “(We were) more confident than ever about our path to creating a strong, sustainable streaming business that would grow subscribers over the long term and ultimately achieve double-digit operating margins. “It’s a company,” he said.
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Disney+ and Hulu have already warned subscribers that they will soon crack down on password sharing, and Johnston said that starting this summer, Disney+ accounts suspected of “inappropriate sharing” will be given the option for borrowers to start their own subscriptions. Account holders who wish to add a non-family member later this year will be able to do so for an additional fee. It’s still early days and Disney won’t see the benefits until the second half of 2024, Johnston said.
“We want to reach the widest audience possible with great content, and we look forward to rolling out these new features to improve the overall customer experience and grow our subscriber base,” he said.
One analyst said he was surprised by the double-digit margin forecast, and when asked for more details on how Disney plans to achieve that goal, Iger responded: “In some ways it’s news, but in some ways it shouldn’t be news. , because we’ve always wanted to build a good business in that regard.” He said Disney will get there by increasing subscribers and “at some level of pricing.”
Another way Disney is trying to increase subscribers is through its ESPN subsidiary Fox Corp. It’s through a massive joint effort announced Tuesday with FOX.
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It provides sports streaming services as a shared asset. After one analyst said this sounded like an expensive service, Iger said: “If you think about it, sports services will be much cheaper than the big bundles that consumers have to buy. You can watch the same channels on cable and satellite.”
Iger and Co. made a lot of progress this quarter, but not enough to satisfy the diverse group of activists gathered around the Magic Kingdom. A spokesperson for Trian Partners, of which activist Nelson Peltz is a founding partner, said in an emailed statement: “This is déjà vu all over again. We saw this movie last year and we didn’t like the ending.”
Also read: Activist investor Nelson Peltz calls for joining Disney’s board of directors.
But as terse as that statement may sound, Team Iger has finally made great strides in the company’s turnaround. Investors seemed to agree, at least for now, so Disney’s stock soared nearly 7% in after-hours trading.
