Disney’s Streaming Unit is Finally (Sort of) Profitable

The company’s Disney+ and Hulu platforms eked out $47 million in operating income. Just don’t ask about ESPN+.

Photo of Disney+ booth featuring logos of Disney's streaming services
Photo by Anthony Quintano via CC BY 2.0

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Streaming is no longer where dreams come to die for Disney. 

In its second-quarter earnings report on Tuesday, Disney announced its streaming business had, at long last, achieved profitability across a three-month span. Or, at least pieces of its streaming business had anyhow. That was the meticulously qualified silver lining the House of Mouse presented to investors as it braced for yet another quarter of all-too-familiar challenges for a legacy media empire in flux.

Stream Scenario

Disney’s dream of supplanting its once-lucrative linear TV business with a 21st-century direct-to-consumer business is both one step closer to fruition and hundreds of steps away from reality. In its second quarter, its Disney+ and Hulu platforms eked out $47 million in operating income — enough for Disney to claim a streaming profit. But Disney+ and Hulu are just two of its three streaming legs, and when taking the still-flailing ESPN+ streamer into account, the direct-to-consumer division still lost $18 million. 

That’s a major improvement from the $659 million loss the DTC business suffered in the same quarter a year ago, a dismal figure that’s been roughly routine for the company since Disney+ launched in late 2019. But DTC is still nowhere near the revenue-and-profit machine that linear TV once was — and linear TV itself remains in freefall: 

  • In the second quarter, linear TV revenue, which excludes ESPN and related networks, fell 8% to just under $2.8 billion, while operating income plummeted 22% to $758 million. A decade ago, the unit regularly drove some $2 billion in profit each quarter.
  • This quarter’s decline can be attributed, in part, to lower ad revenue across networks as well as the debut of a “skinny cable bundle” offered by Charter, the second-leading cable company in the US, which excludes eight Disney-owned channels that typically trafficked in lucrative carriage fees. Meanwhile, the unit that includes Disney’s film studios lost $18 million, as the company still recovers from last year’s dual Hollywood talent strikes.

Shareholders seemed unimpressed by the touted streaming profit; Disney’s share price fell 9.5% on Tuesday. “The initial market reaction is showing that there are more questions than answers for earnings over the next couple of quarters,” Brian Mulberry, a client portfolio manager at Zacks Investment Management, told Reuters.

One More Thing: The earnings call was not without bright spots and big announcements. The company’s experiences unit, which includes its parks, scored operating income of $2.3 billion in the quarter, up 12% year-over-year. Meanwhile, Hulu added 700,000 subscribers while Disney+ grew by more than 6 million — though part of Disney’s deal with Charter granted Charter subscribers a Disney+ login. Still, the subscriber boost puts Disney’s DTC business another inch closer to achieving Netflix-esque margins, and the company promises true DTC profitability by this year’s fourth quarter. With Nelson Peltz finally off his back, perhaps CEO Bob Iger can truly bring Disney into the future. And then successfully retire this time.