Disney reported a drop in adjusted quarterly profits, even as it trimmed losses on its streaming business and reported stronger profits from its theme parks.
The media and entertainment conglomerate earned $1.9 billion, or 93 cents a share, excluding special items, matching the forecast of analysts surveyed by Refinitiv, but down 9% from the $2.1 billion it earned on that basis a year earlier.
Including special items, net income nearly doubled to $2.1 billion from $1.1 billion. Revenue rose 13% to $21.8 billion.
The company's closely watched streaming business, Disney+, trimmed losses by $228 million, or 13%, from a year earlier to $659 million. The improvement from the previous quarter was even greater, as it trimmed losses from $1.1 billion.
Disney did it with a 2% drop in subscribers for Disney+ and a 1% drop overall, when including ESPN+ and Hulu in subscription totals. It was able to trim losses with fewer subscribers through higher subscription revenue and a decrease in marketing costs, partially offset by higher programming and production costs.
The company's ongoing efforts to trim losses and begin to make profits on its streaming business could disappoint some of the people who have enjoyed Disney+, however.
First of all, it expects to remove some of its existing content on the streaming services, and will be taking a $1.5 billion to $1.8 billion charge in the current quarter related to the removal of that content. And CEO Bob Iger said the company will produce less content for the services going forward.
"It's critical we rationalize the volume of content we're creating and what we're spending to produce our content," Iger said about the cuts to the streaming service.
Secondly, it is looking to increasing the amount of advertising on its various services, including a European version of Disney+ with ads that will debut later this year.
"We have only just begun to scratch the surface of what we can do with advertising on Disney+, and I'm incredibly bullish on our longer-term advertising positioning," Iger said.
And for those subscribers who want to pay for an ad-free version of Disney+, they will be paying higher subscription fees, Iger said "to better reflect the value of our content offerings."
Disney and other media and technology companies offering streaming have been making a greater focus on profitability of streaming services, rather than just subscriber growth.
Three months ago Disney reaffirmed its guidance that Disney+ remains on course to be profitable in the next fiscal year, which runs from October through September 2024, although it cautioned that could be affected by an economic downturn. Its earnings statement did not mention anything new on guidance, but the company is "confident that we're on the right path for streaming's long-term profitability," Iger said.
This is a developing story.
