Disney has been a powerhouse in the entertainment industry for decades, but with the rise of streaming services, the company has had to adapt to stay relevant. In the second quarter, Disney came close to turning a profit in its streaming units for the first time, marking a significant shift in the company’s focus. The shift from traditional TV to streaming has been a long time coming, with major legacy media companies like Disney, Paramount Global, Warner Bros. Discovery, and Comcast’s NBCUniversal all launching their own subscription streaming services.
The narrative among industry insiders has always been that streaming would eventually overtake cable TV as the primary money-making engine for media companies. While this shift hasn’t fully materialized yet, Disney’s latest results suggest that the moment is fast approaching. Disney’s streaming services, including Disney+, Hulu, and ESPN+, nearly broke even in the second quarter, a significant improvement from a year ago when they reported a loss. Not only is Disney on the brink of profitability in streaming, but its traditional linear TV results have been declining rapidly.
Disney has long held back on making its sports network ESPN available outside of the cable bundle, but with the changing landscape of media consumption, the company is finally embracing streaming. ESPN’s revenue rose in the second quarter, but operating income dropped due to a decline in cable subscribers and higher programming costs. The decline in Disney’s other linear networks, such as ABC, Disney Channel, and National Geographic, was even more alarming, with revenue falling and operating income slumping.
Despite the challenges in the traditional TV market, Disney is positioning itself for success in the streaming era. The company has announced plans to launch a skinnier bundle of linear cable channels in partnership with other media companies, making ESPN available outside of traditional cable for the first time. Additionally, Disney will be launching its flagship ESPN streaming service next year, allowing consumers to subscribe to ESPN without a cable subscription. Disney’s streaming services are expected to become profitable in the fourth quarter, and the company is projecting further improvements in profitability in fiscal 2025.
The big question for Disney moving forward is whether investors will embrace this new reality. The success of Disney’s streaming services will be critical in determining the company’s future growth and profitability. With Chief Executive Officer Bob Iger’s impending retirement, the company’s next steps in the streaming space will be crucial. Disney’s shift from traditional TV to streaming marks a significant turning point for the company, and its ability to adapt to the changing media landscape will be key to its success in the years to come.