Disney’s CEO Bob Iger said Disney+ would become profitable by 2025. The latest quarterly earnings proved him right.
Disney achieved a major milestone last quarter as reported by the latest earnings release. Although the overall company reported a net loss, its streaming sector turned a profit for the first time.
Total revenues were in line with Wall Street estimates at $22.08 billion for the quarter. Disney’s losses amounted to $20 million, down from the $1.27 billion in net income last year. The loss could be attributed to the $2.05 billion restructuring and impairment charges.
Disney+ and Hulu, the company’s two streaming platforms, turned $47 million in operating income, up from a $587 million operating loss last year. Disney’s CEO Bob Iger has promised to make streaming profitable since Disney+ first opened in 2019.
“The big surprise of the day came on the streaming front, which finally managed to bring profits - way ahead of predictions - amid Hollywood’s massive strike period,” senior analyst Thomas Monteiro told Yahoo! Finance.
Disney is realizing that a Netflix-like model could be the only way to make streaming profitable, Monteiro added.
Until now, Netflix was the only profitable streaming platform. Thanks to its massive global presence, Netflix managed to win the so-called “streaming wars”, plunging ahead of Hollywood majors trying to open their proprietary streaming sites.
The stabilization of streaming
Hollywood producers have tried to stabilize streaming in the market for over a decade. Even now, majors do not know if and how to keep the theatrical window into the equation.
However, it appears increasingly clear that theatrical windows are necessary for profitability. Distribution in theaters gives much more visibility than a simple streaming release. Disney tried to make sense of it with experiments like a simultaneous theatrical-streaming release (Black Widow) or a pay-to-watch streaming release (Mulan). None of these experiments, however, was successful.
In the last quarter, Disney lost money in its licensing and box office business due to the lack of major theatrical releases. Revenues from content dropped 40% year-on-year to $1.39 billion. In the first quarter of 2023, Disney turned a much higher-than-usual revenue because of the “Avatar: The Way of Water” release.
The loss from content and box office revenues is another major reason for the company’s overall net losses.
The new industry standard is slowly becoming a three-week theatrical release followed by a streaming window. If the standard remains the same, it will be increasingly easier for production firms to turn a profit.
Iger said Disney+ is on the path to stable profits by 2025. And, so far, the company’s performance proved him right.
