Disney released its fiscal first-quarter earnings on Wednesday, surpassing analysts’ expectations on both revenue and profit. However, the report also confirmed the anticipated decline in Disney+ streaming subscribers.
The company’s streaming division remained profitable for another quarter, despite Disney+ experiencing a 1% drop in its total subscriber base. While domestic subscriptions increased by approximately 1%, international subscriptions saw a decline of around 2%.
During its fiscal fourth-quarter earnings report in November, Disney had forecasted a “modest decline” in subscriptions for the December quarter. On Wednesday, the company reiterated this expectation for the second quarter.
As of the end of the quarter, Disney+ had 124.6 million paid subscribers, a slight decrease from the 125.3 million reported at the end of the previous fiscal quarter. Meanwhile, Hulu’s total subscriptions rose by 3%, reaching 53.6 million.
The slowdown in streaming subscriber growth comes after a price increase for Disney’s services last year. According to the company, the average monthly revenue per paid Disney+ subscriber grew by approximately 4% to $7.99, driven by these price hikes.
Net income increased nearly 23% to $2.64 billion, or $1.40 per share, compared to $2.15 billion, or $1.04 per share, in the same quarter the previous year.
After adjusting for one-time charges, including restructuring costs and impairments related to Hulu’s intangible assets, Disney’s adjusted earnings stood at $1.76 per share. Revenue climbed 4.8% year-over-year to $24.69 billion, up from $23.55 billion.
Performance Across Key Segments
Revenue gains were observed across Disney’s entertainment, sports, and experiences divisions.
The entertainment segment saw a 9% increase in revenue, reaching $10.87 billion. Operating income for the unit, which includes direct-to-consumer, linear TV, and content sales, surged by 95% to $1.7 billion, attributed to increased content sales and licensing. However, linear TV remained a drag on overall performance.
Despite this, CEO Bob Iger expressed optimism about the linear TV business during Wednesday’s investor call, echoing sentiments from the previous quarter’s earnings call.
“They are not a burden at all. They are actually an asset,” Iger stated, emphasizing that Disney continues to program and fund its networks to support its streaming services. While acknowledging potential future changes to its TV networks, Iger clarified that no immediate shifts are planned.
“We actually feel good about the hand that we have and the manner in which we’re managing both the linear and streaming businesses across the board,” Iger said. Disney’s film division also contributed to the strong quarterly performance.
The Thanksgiving weekend debut of Moana 2 significantly boosted box office revenue, with the film continuing to perform well into the new year, surpassing $1 billion in earnings during the Martin Luther King Jr. Day weekend. Disney noted that revenue from content sales and licensing received a boost from Moana 2.
Disney Company (Photo: AP)Throughout 2024, Disney dominated the global box office with films like Deadpool & Wolverine from Marvel and Pixar’s Inside Out 2.
The company projects double-digit growth in operating income for the entertainment division in fiscal 2025, with direct-to-consumer operating income expected to rise by approximately $875 million.
Parks and Experiences Performance
Disney’s experiences division, which includes theme parks, cruises, resorts, and consumer products, saw a 3% increase in revenue, reaching $9.42 billion.
Domestic theme parks contributed 68% of the division’s revenue, generating $6.43 billion, a 2% improvement over the previous year. However, hurricanes Milton and Helene, combined with a decline in attendance and investments in Disney’s cruise fleet, impacted domestic operating income.
As a result, domestic theme park operating income dropped 5% to $1.98 billion for the quarter. Despite these setbacks, Disney anticipates operating income growth of 6% to 8% for its experiences segment in fiscal 2025.
U.S. theme parks have experienced a recent decline in attendance following a post-pandemic surge. Disney CFO Hugh Johnston stated that the experiences segment performed better than expected for the quarter.
“In fact, the consumer is a bit stronger than we would have expected,” Johnston said. “I think what we’re seeing is consumers are just very value-focused, and when you deliver value to them, they’re willing to pay for it.”
Disney’s parks have continued to generate record revenue and profit, even as the company raises prices. Disney is currently in the midst of a 10-year, $60 billion investment in its experiences division.
Sports and ESPN Performance
Disney’s sports division, led by ESPN, posted an 8% year-over-year revenue increase, reaching $4.81 billion. Operating income rose 15% from the previous year to $228 million.
The company expects its sports segment, which includes ESPN and Star India, to grow operating income by 13% in fiscal 2025.
However, Disney cautioned that second-quarter sports segment earnings would be “adversely impacted” by approximately $100 million due to the shifting of three College Football Playoff games from the first quarter to the second, as well as an additional NFL game during the period.
Disney’s networks aired the full Southeastern Conference college football season, contributing to a 56% year-over-year increase in viewership on ABC, which averaged 5.8 million viewers across 46 regular-season games. The strong college football season helped drive Disney’s advertising revenue.
The company also addressed its involvement in the now-defunct Venu sports streaming joint venture. Disney, along with Warner Bros. Discovery and Fox, had initially planned to launch Venu as a sports-focused streaming platform but abandoned the project due to legal complications and the rise of alternative streaming bundles.
Iger explained during the investor call that Venu ultimately seemed “redundant” compared to existing skinny bundle offerings from traditional pay-TV providers.
Following the Venu project’s termination, Fox announced its plans to launch its own independent sports streaming service.
Looking ahead, Disney remains focused on expanding its streaming capabilities. The company plans to integrate its streaming apps into Disney+ and is exploring various options for ESPN’s digital future. A direct-to-consumer ESPN streaming platform, known internally as “Flagship,” is set to launch this fall.
“We’re obviously leaning into the development of what is now called ‘Flagship,’ which is essentially ESPN with multiple, multiple elements to it,” Iger said, highlighting plans for sports betting integration and enhanced customization options for users.
