A scene from Disney Pixar's Inside Out 2.
Courtesy of: Disney 2024 | Pixar
Here's the surprise: DisneyMedia activity is no longer a burden on the company.
The basic narrative for Disney investors since 2022 has been how streaming losses, combined with a decline in traditional pay-TV business and a string of box office flops, have entrenched rising sales and profits at the company’s theme parks and resorts. The result has been a company whose shares have fallen about 24% in the past two years, while the S&P 500 has risen 28% over the same period.
The company’s second-quarter results signal a turnaround. Disney’s combined streaming businesses — Disney+, Hulu and ESPN+ — posted their first-ever quarterly profit, bringing in $47 million. That’s a big improvement from a $512 million loss in the same quarter last year.
Disney’s theatrical unit is also enjoying a run of success. “Inside Out 2” became the highest-grossing animated film of all time in recent weeks. “Deadpool & Wolverine” has grossed $824 million in its two-week worldwide release. Disney became the first studio in 2024 to surpass $3 billion in global ticket sales.
Meanwhile, Disney saw “slower consumer demand toward the end of the third quarter than we had previously expected” for its theme parks division, sending shares down about 3% in early trading.
Disney CEO Bob Iger said during his company’s earnings call that he expects the media business to gain more momentum. That’s pleasing to Wall Street, which wants growth and profitability at the same time.
“We are very optimistic about the future of this business,” Iger said, referring to streaming. “You can expect good growth in fiscal 2025.”
Iger pointed to a planned crackdown on password sharing, which will begin “in earnest” in September, as a tool that will help generate new subscribers and additional revenue for the company. Similar efforts have been made by Netflix The world's largest live streaming company has helped add new customers over the past year.
Disney is also planning to raise prices for its streaming services in mid-October. Most Disney+, Hulu and ESPN+ plans will cost between $1 and $2 more per month.
Iger reviewed a list of Disney's yet-to-be-released film titles to underscore the studio's strong position for the rest of 2024 and beyond.
“Let me read you the movies that we’re going to make and release over the next two years or so,” Iger said. “We have ‘Moana,’ ‘Mufasa,’ ‘Captain America,’ ‘Snow White,’ ‘Thunderbolts,’ ‘Fantastic Four,’ ‘Zootopia,’ ‘Avatar,’ ‘Avengers,’ ‘The Mandalorian,’ ‘Toy Story,’ to name a few. When you think about not only the box office potential of those movies but also their potential to drive global streaming value, I think there’s reason to be optimistic about where we’re headed.”
Disney isn’t trying to downplay the importance of the parks. The company announced last year that it plans to invest $60 billion in its theme parks and cruise lines over the next decade. But surely the company would do well to convince investors that its media units aren’t weighing on the stock price.
Disney shares fell on Wednesday, likely as investors focused on the theme parks. The next step is for the stock to rise during the quarterly earnings report as investors are excited about the media units.
WATCH: Watch CNBC's full interview with Disney CFO Hugh Johnson after earnings results
