Streaming Grows As Disney Manages Overall Profit

Following two quarters of losses amid COVID-19 pressures, The Walt Disney Co. surprised Wall Street with a modest profit for the most recent quarter, the first quarter of its new fiscal year. For the quarter ended Jan. 2, Disney managed net income from continuing operations of $29 million — a big drop from $2.13 billion a year earlier, but a profit nonetheless.

The big drag, of course, is the theme parks. Some remain closed and those which are open have to operate at reduced capacity due to the pandemic. Noting comments earlier in the day by Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, that Americans of all ages — not just targeted groups — could begin to receive COVID-19 vaccinations by April, Disney CEO Bob Chapek told Wall Street analysts Thursday “that’s a game changer.”

Investors cheered growth in the company’s streaming business, with Disney+ subscriptions hitting 94.9 million — ahead of projections and dramatically up from 26.5 million at the end of the fiscal first quarter last year. For Disney’s other streaming brands, ESPN+ subs were up 83% from a year ago and Hulu 30%.

Under Disney’s new segment reporting structure, revenues for the Linear Networks (cable and broadcast in the U.S. and abroad) rose 2% to $7.69 billion, while operating income declined 4% to $1.73 billion. For the domestic networks, cable was down, while broadcast was up. Overall revenues for the domestic operations rose 1% to $6.07 billion and operating income dropped 7% to $1.12 billion.

“At broadcasting, higher political advertising at our owned television stations drove an increase in operating results versus the prior year, partially offset by a decrease at the ABC Television Network,” said Disney CFO Christine McCarthy. The company reported that lower network advertising revenue was due to lower impressions, reflecting lower average viewership and lower rates. That was partially offset by the fiscal first quarter this year including the New Year’s Rockin’ Eve, whereas the year-ago quarter had ended Dec. 28.

What about the current quarter?

“First, at our domestic Linear Networks, we expect ESPN will benefit in the second quarter from the timing of college football and other sporting events, with lower rights costs being partially offset by lower advertising revenue,” McCarthy told the analysts.

“Our broadcasting business will be negatively impacted in the second quarter due to lower political advertising versus the prior year — in addition to the shift of the Academy Awards to third quarter,” she advised.