A scene from the Disney and Pixar film “Inside Out 2.”
Courtesy: 2024 Disney | Pixar
Here's a surprise: DisneyThe media business is no longer a burden for the company.
Since 2022, the main narrative for Disney investors has been how streaming losses, combined with a declining traditional pay-TV business and a string of box office failures, have been propping up rising sales and profits at the company’s theme parks and resorts. The result has been a company whose stock has fallen about 24% over the past two years, while the S&P 500 has gained 28% over the same period.
The company’s second-quarter results suggest a turnaround is underway. Disney’s combined streaming businesses (Disney+, Hulu and ESPN+) turned a quarterly profit for the first time in their history, earning $47 million. This is a significant improvement from the $512 million loss in the same quarter a year earlier.
Disney’s film unit is also on a roll. “Inside Out 2” became the highest-grossing animated film of all time in recent weeks. “Deadpool & Wolverine” has grossed $824 million after two weeks of global release. Disney has become the first studio in 2024 to surpass $3 billion in global ticket sales.
Meanwhile, Disney saw a “moderation in consumer demand toward the end of [fiscal] “Third quarter that exceeded our previous expectations” for its theme parks division. That caused shares to fall about 3% in early trading.
Disney CEO Bob Iger said during his company's earnings call that he expects the momentum in the media business to only gain momentum. That's music to the ears of Wall Street, which wants both growth and profitability.
“We're very optimistic about the future of this business,” Iger said of streaming. “You can expect it to grow significantly in fiscal year 2025.”
Iger cited a planned crackdown on password sharing, set to begin “in earnest” in September, as a tool that will help generate new subscribers and increased revenue for the company. Netflix has helped the world's largest streamer add new customers over the past year.
Disney is also raising prices for its streaming services in mid-October. Most Disney+, Hulu and ESPN+ plans will cost between $1 and $2 more per month.
Iger listed a list of movie titles that Disney has not yet released to emphasize the studio's strong positioning for the remainder of 2024 and beyond.
“Let me read you the movies that we’re making and releasing over the next two years,” Iger said. “We’ve got ‘Moana,’ ‘Mufasa,’ ‘Captain America,’ ‘Snow White,’ ‘Thunderbolts,’ ‘Fantastic Four,’ ‘Zootopia,’ ‘Avatar,’ ‘The Avengers,’ ‘The Mandalorian’ and ‘Toy Story,’ to name just a few. When you think about not just the potential of those movies at the box office, but the potential of those movies to drive global streaming value, I think there’s reason to be optimistic about where we’re headed.”
Disney isn't downplaying the parks. The company said last year that it plans to invest $60 billion in its theme parks and cruise lines over the next decade. But it's certainly healthier for the company to convince investors that the media units aren't dragging down the stock price.
Disney shares fell on Wednesday, likely because investors were focused on the parks. The next step is for the stock to rise during a quarterly earnings report because investors are excited about the media units.
WATCH: Watch CNBC's full interview with Disney CFO Hugh Johnson after earnings results
