UPDATE—May 7, 2024: This article has been updated to reflect additional information about Disney’s outlook and more recent share price values.
After Disney (DIS) reported a net loss for its fiscal second quarter despite returning a surprise profit in its direct-to-consumer entertainment segment and gave weak guidance for the third quarter, CEO Bob Iger and other executives joined the company’s earnings call to discuss its streaming segment, expectations around ESPN+, the company’s plans around Iger’s succession, and Disney’s parks strength as well as cruise business opportunities.
Disney+ and Hulu Return Surprise Profit, With Combined Streaming Businesses To Be Profitable by Fiscal Year End
Iger highlighted in the call that the entertainment portion of the company’s streaming business “achieved an important milestone” of profitability in the quarter.
Disney reported an operating profit of $47 million in its direct-to-consumer entertainment segment, which consists of Disney+ and Hulu, compared to a $587 million loss in the year-ago period. As a whole, its streaming businesses including the ESPN+ Sports segment returned an $18 million loss, narrowing significantly from the $659 loss recorded in the same period a year prior.
However, Iger noted that the company is “anticipating a softer third quarter, due in large part to the seasonality of our Indian sports offerings.” Disney CFO Hugh Johnston said that Disney doesn’t expect to see core Disney+ subscriber growth in the third quarter, but anticipates subscriber growth will return in the fourth quarter.
Iger reiterated that the combined streaming businesses are still on track to return a profit by the end of the 2024 fiscal year.
Iger Says He’s ‘Very Bullish’ on ESPN Integration
When asked about Disney’s sports push, with Disney set to add some live games and studio shows from ESPN to Disney+ by the end of 2024, Iger said he feels “very bullish about it.”
Iger said the company has “locked up long-term deals with significant sports organizations that includes college football championships, all the NCAA championships, and the NFL.” He also said he’s optimistic that Disney is “going to end up with an NBA deal that will be long term.”
“There’s really nothing like ESPN in the sports world and their hand is solid for the next decade,” he said.
Disney Taking Steps To Plan for Iger’s Succession
When asked about the company’s plans to appoint a successor for Iger, he said that “the board is heavily engaged in the process and has appointed a succession planning committee that is meeting on a regular basis to not just discuss but also to manage the process.”
“I’m confident that they will choose the right person at the right time and that to the extent that I can [I] will participate in the smooth transition,” Iger said.
Iger, who is 73 years old, was reappointed to serve as CEO in 2022 after previously holding the role from 2005 to 2020. Disney’s leadership has faced recent challenges from activist investors, but managed to stave them off so far, resolving its latest proxy battle at its most recent shareholder meeting.
Parks Strength Drives Earnings, With a Focus on Cruise Business
Iger reported that Disney’s second-quarter results were driven in large part by its experiences segment as well as the streaming business.
Johnston said operating income for Disney’s parks and experiences increased by 13% year-over-year, with strong international parks growth driven by the Hong Kong Disneyland Resort, while Walt Disney World and the cruise business both contributed to domestic growth at Disneyland.
He noted that the company is “seeing some evidence of a global moderation from peak post-Covid travel” and pressure from wages, though he added that “there are lots of opportunities to continue to grow attendance, both domestically and internationally,” specifically in the cruise business.
The cruise business “has an enormous number of opportunities” the CFO said, adding that “that is why [the company is] leaning more heavily into that business” and “expect[s] to get excellent returns.”
Disney shares closed 9.5% lower at $105.39 Tuesday. However, even with Tuesday’s losses, shares have gained over 16% since the start of the year.