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Disney’s Earnings Highlight Streaming as a Profitable Alternative to Traditional TV

In News
November 15, 2024

Disney’s recent earnings report provides hope that streaming services like Disney+, Hulu, and ESPN+ could eventually replace traditional linear TV. Disney’s CFO Hugh Johnston revealed that by fiscal 2025, streaming is expected to generate enough operating income to offset the decline in linear TV income, marking a significant shift for the company. Disney predicts an $875 million increase in direct-to-consumer operating income for the coming year, surpassing $1 billion in profit.

This positive outlook defies the skepticism of prominent investors like Warren Buffett, who previously doubted the profitability of the streaming business. Buffett, known for his cautious approach, had expressed doubts in 2023, stating that streaming “isn’t really a very good business.” However, Disney’s latest performance shows that streaming services are on the rise.

A combination of content spending reductions and increasing subscriber growth across Disney’s platforms has turned streaming into a profitable venture. In fiscal Q4, Disney’s streaming platforms posted $321 million in operating income, and for the year, Disney+ and Hulu together made $143 million, a sharp turnaround from the $2.5 billion loss in the previous year.

The shift from linear TV to streaming has not been without challenges. Traditional pay-TV had long been a lucrative model, benefiting from steady monthly payments and low churn rates. However, with streaming services, consumers can easily cancel subscriptions and choose specific content, making it harder for media companies to maintain consistent revenue.

Despite this, Disney remains confident that streaming will thrive as a long-term replacement. Bundling and content consolidation may help mitigate the effects of churn and keep consumers locked in. The company’s strategy of shifting its best content to streaming makes cancelling services less appealing to consumers.

Disney’s positive results follow Warner Bros. Discovery, which reported strong streaming profits as well. This suggests the broader media industry could be stronger than anticipated, with Disney shares rising by 6.2% after the earnings announcement.