US media and entertainment heavyweight Disney’s combined streaming business generated a profit for the first time in the third quarter (Q3) of the financial year, primarily due to the ESPN+ platform.
For the three months ending June 29, Disney posted revenue of $23.1 billion and income of almost $3.1 billion.
Revenue is up 4% from the previous year when the company suffered a $134 million loss.
Disney’s total segment operating income increased 19% to $4.2 billion, led by the positive results for its entertainment unit, particularly streaming.
The media giant’s combined streaming business, which consists of Disney+, Hulu, and ESPN+, was profitable for the first time.
Operating income for the entertainment segment grew from $408 million in 2023 to $1.2 billion in Q3 this year.
The combined streaming business posted an operating profit of $47 million compared with a loss of $512 million in the same quarter last year.
The profit came a quarter earlier than Disney had expected and was helped by $66 million from ESPN+, which offset a loss of $19 million from Disney+ and Hulu.
Bob Iger, Disney chief executive, has said: “Our performance in Q3 demonstrates the progress we’ve made against our four strategic priorities across our creative studios, streaming, sports, and experiences businesses.
“This was a strong quarter for Disney, driven by excellent results in our entertainment segment both at the box office and in direct-to-consumer, as we achieved profitability across our combined streaming businesses for the first time and a quarter ahead of our previous guidance.”
Disney, this week, announced a price increase for streaming subscriptions of $1 to $2 monthly from October. ESPN+ will increase in price from $10.99 to $11.99 per month.
Meanwhile, the Disney+ basic and premium packages will now be priced at $9.99 and $15.99, respectively (up from $7.99 and $13.99). Hulu with ads will cost $9.99 monthly (up from $7.99), while Hulu without ads will cost $18.99 per month (up from $17.99).
The price hikes are part of Disney’s continued strategy to entice customers to purchase its streaming services bundles.
For some time, Disney has offered a bundle of its own services, either Hulu and Disney+, or the two streaming services plus ESPN+.
The existing bundle of Disney+ and Hulu, both with ads, will increase in price from $1 to $10.99 per month. The ad-free bundle will remain at $19.99 per month.
Iger said: “We’re seeing growth in consumption and the popularity of our offerings, which gives us the pricing leverage we believe we have.”
Earlier this year, Disney announced the launch of a joint-venture streaming service with Warner Bros. Discovery, and Fox Corp, titled Venu Sports that will be rolled out later this year.
Disney also has plans to launch a separate ESPN streaming service in 2025.
Q3 revenue for Disney’s sports business, which includes the ESPN network and Star India pay-television broadcaster in that country, was up 5% to $4.6 billion. Operating income came to $802 million, a drop of 6%.
ESPN’s domestic business contributed $3.9 billion to the overall revenue and $1.1 billion of the operating income.
The major sports broadcaster saw an increase in programming and production costs due to higher NBA rights costs and costs to air the NHL Stanley Cup Finals in the quarter.
The operating loss at Star India grew 45% from $216 million to $314 million, which Disney attributed to higher programming and production costs attributable to the timing of the ICC T20 World Cup in the US and Caribbean.
Disney expects the profitability of its combined streaming businesses to further improve in Q4, with ESPN+ expected to be profitable again in the quarter.
Iger said: “I feel very bullish about the future of this business. We’re not saying much more about it, except you can expect it to grow nicely in fiscal 2025.”
