The Walt Disney Company reported earnings for its third quarter ended June 29, 2024. Revenues for the quarter increased to $23.2 billion from $22.3 billion in the prior-year quarter. “Our performance in Q3 demonstrates the progress we’ve made against our four strategic priorities across our creative studios, streaming, sports, and Experiences businesses,” said Robert A. Iger, Chief Executive Officer, The Walt Disney Company.
The media giant said Entertainment segment operating income nearly tripled year over year in Q3, due to significantly improved results at Direct-to-Consumer and Content Sales/Licensing and Other.
Entertainment Direct-to-Consumer’s better-than-expected Q3 performance, combined with the company’s profitable results at ESPN+, resulted in positive profitability at its combined streaming businesses for the first time and one quarter ahead of its previous guidance of achieving profitability in Q4.
“The success of Inside Out 2, which became the highest-grossing animated film of all time, demonstrated the renewed creative strength of our studios and drove strong outperformance at Content Sales/Licensing and Other. Surrounding Inside Out 2’s release, the original Inside Out (2015) helped drive more than 1.3 million Disney+ sign-ups and generated over 100 million views globally since the first Inside Out 2 teaser trailer dropped,” Disney said in a statement.
ESPN operating income grew by 4%, while Star India results were lower versus the prior year, resulting in Sports segment operating income declining by 6% in Q3. Domestic ESPN advertising revenue increased 17% year over year.
Q3 Experiences revenue increased by 2% and segment operating income decreased by 3%. Segment revenue growth was impacted by moderation of consumer demand towards the end of Q3 that exceeded the company’s previous expectations: “Despite this demand dynamic, other parts of the portfolio delivered improved results versus the prior year, including Disney Cruise Line, Consumer Products and some of our international sites. While results at Domestic Parks decreased modestly in the quarter, attendance was comparable year over year and per capita spending was slightly up.”
“Our performance in Q3 demonstrates the progress we’ve made against our four strategic priorities across our creative studios, streaming, sports, and Experiences businesses,” said CEO Iger.
He added, “This was a strong quarter for Disney, driven by excellent results in our Entertainment segment both at the box office and in DTC, as we achieved profitability across our combined streaming businesses for the first time and a quarter ahead of our previous guidance. Despite softer third quarter performance in our Experiences segment, adjusted EPS for the company was up 35%, and with our complementary and balanced portfolio of businesses, we are confident in our ability to continue driving earnings growth through our collection of unique and powerful assets.”
“The combination of exceptional content and a broad brand portfolio is the key to our success as we build streaming into a profitable growth business for the company over the long term,” Iger and Johnston said.
Offering viewers a more unified streaming experience is “one of the ways we expect to enhance the Disney+ product quality,” Iger and Johnston said. That includes the successful integration of Hulu content on Disney+ and the introduction of playlists to Disney+ starting on September 4 for US subscribers.
Iger and Johnston noted that a core element to Disney’s century of success is “the dynamic way we leverage our world-class creativity across multiple business and revenue streams to fuel long-term value.”
“The unmatched creative power of our film and television studios, the wide appeal of our brands and franchises, and the innovative ways we bring our stories to life in our theme parks and experiences is distinctly Disney in a world of entertainment that is crowded with choices,” the two said.
Entertainment
Entertainment segment operating income nearly tripled year over year in Q3, due to significantly improved results at both Direct-to-Consumer and Content Sales/Licensing and Other.
“Results at Entertainment Direct-to-Consumer were stronger than we anticipated this quarter, improving year over year by nearly $500 million to a modest loss of $19 million driven by growth in subscription and advertising revenue in addition to strong cost management. As noted in the last earnings call, results in the third quarter reflect streaming rights costs for ICC at Disney+ Hotstar,” The Walt Disney Company stated.
Advertising revenue at Entertainment Direct-to-Consumer increased by 20% versus the prior year, reflecting growth across Disney+ Hotstar, Disney+ Core, and Hulu. In Q3, its number of domestic streaming advertisers grew by more than 20% versus prior year, largely driven by automation, while programmatic revenue growth increased by over 80%.
Disney+ Core subscribers grew more than expected, with approximately 700K net adds in the third quarter. In Q4, the company expects Disney+ Core subscribers to grow modestly.
Disney expects Entertainment Direct-to-Consumer to be profitable in Q4 and continues to feel optimistic about the trajectory for this business, with multiple building blocks for improving margins over the coming years, including but not limited to:
• Increasing pricing this fall to further align with the value we are providing to consumers
• Product updates and features designed to increase engagement and reduce churn, including playlists, the ESPN tile on Disney+, and improving our recommendation engine with technology enhancements
• Continuing to grow our subscriber base, including by operationalizing paid sharing