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After enduring years of losses, Disney appears to have finally turned a corner with streaming.
In its third-quarter earnings today, the media company reported that its direct-to-consumer business, which consists of Disney+, Hulu and ESPN+, turned its first profit, producing an operating income of $47 million on $6.38 billion in revenue.
The achievement is symbolic in many ways, as Disney+ and Hulu still lost $19 million, which is itself an improvement of nearly $500 million from a year ago. The two services only entered the black when paired with ESPN+, which turned its first profit this quarter.
However, the company anticipates full profitability for all its streaming services by the next quarter, an expectation backed up by the consistent growth of its direct-to-consumer business since the launch of Disney+ inception in 2019.
“The goal is to grow engagement on the platform,” chief executive Bob Iger said during the call. “What I mean by that is offering a wider variety of programming, which is why we’re adding news, why we’re adding the ESPN tile to it and why we’re bundling aggressively to give consumers the ability to buy across all of our creative engines. And we feel very bullish about the future of this business.”
Overall, Disney brought in a profit of $2.62 billion for the quarter, following a loss of $460 million a year prior, and revenue rose 3.7% to $23.16 billion. The healthy earnings come on the heels of a spate of layoffs the company initiated last week. Disney’s ESPN also recently some of the rights as part of a $11 billion package of NBA rights.
Ad business boom
Disney had other, clearer-cut reasons to celebrate, particularly in its advertising business.
Advertising revenue at its streaming operation increased by 20% compared to the year prior, and its number of streaming advertisers grew by more than 20% as well.
Overall advertising revenues grew 8%, including a 17% growth at ESPN, according to Iger. Programmatic revenue grew by over 80%.
The growth comes on the heels of its upfront closing, which for the second year straight saw more than 40% of its ad commitments go toward streaming and digital offerings. The overall volume and revenue of its upfront rose 5% over last year.
Categories that performed well include financial services, consumer products and technology, while automotive has softened, according to Iger.
Iger attributed the growth to a variety of factors, including advertisers’ warm reception to a new technology offering that allows Disney to sell across its platforms. The capability, called Disney Streaming, allows the company to sell audiences rather than channels, which enables advertisers to more effectively target their desired audiences.