The streaming future Disney promised is finally here as cable TV decays

For


Disney,
the
future
is
now.

It’s
been
five
years
in
the
making,
but
Disney
nearly
turned
a
profit
in
its
streaming
units
for
the
first
time
in
the
second
quarter,
losing
just
$18
million
between
Disney+,
Hulu
and
ESPN+.
That’s
improvement
from
a
loss
of
$659
million
a
year
ago.

Stripping
out
ESPN+,
Disney+
and
Hulu
actually
made
money
in
the
quarter
—
$47
million.
Last
year
in
the
second
quarter,
Disney+
and
Hulu
lost
$587
million.

The
thesis
among
all
major
legacy
media
companies
has
been
that
streaming
will
eventually
take
over
for
cable
TV
as
the
primary
money-making
engine.
That’s
why
Disney,


Paramount
Global,


Warner
Bros.
Discovery
and


Comcast‘s
NBCUniversal
all
built
their
own
subscription
streaming
services.

That
hasn’t
happened
yet,
but
this
quarter
finally
suggests
that
moment
is
upon
us.
It’s
not
just
that
Disney
nearly
made
money
in
streaming
—
it’s
that
the
company’s
traditional
linear
TV
results
were
awful.

For
years,
Disney
held
back
on
making
ESPN
available
outside
of
the
cable
bundle
because
of
how
lucrative
the
sports
network
was
inside
the
walled
garden
of
traditional
TV.
Those
days
are
also
nearly
over.
Disney
is

launching
a
skinnier
bundle
of
linear
cable
channels
with
Warner
Bros.
Discovery
and


Fox
in
the
fall,
making
ESPN
available
outside
of
traditional
cable
for
the
first
time.

Next
year,
Disney
will
launch
its
flagship
ESPN
streaming
service,
which
will
allow
consumers
to
subscribe
to
ESPN
without
cable
at
all.

Looking
at
Disney’s
results
in
the
second
quarter,
it’s
clear
why
the
company
has
finally
pulled
the
ripcord
on
ESPN.
While
ESPN’s
revenue
rose
3%
to
$4.21
billion,
operating
income
dropped
9%
to
$799
million.
A
drop
in
cable
subscribers,
and
higher
programming
costs
attributable
to
the
College
Football
Playoff
led
to
the
decline,
Disney
said.
ESPN
advertising
rose
to
offset
the
cable
subscriber
decline.

The
decline
in
the
company’s
other
linear
networks,
such
as
ABC,
Disney
Channel,
FX,
National
Geographic,
and
Disney
Junior,
was
even
more
alarming.
Linear
network
revenue
across
Disney’s
portfolio,
excluding
ESPN,
fell
8%
to
$2.77
billion.
Operating
income
slumped
a
whopping
22%
to
$752
million.

Disney
shares
fell
5%
in
premarket
trading.

Simply
put,
traditional
TV
is
dying
on
the
vine.
It’s
declining
at
the
most
rapid
pace
consumers
have
seen.

Disney
has
prepared
for
this
moment
for
years.
Streaming
will
become
profitable
in
the
fourth
quarter,
Disney
reiterated,
and
will “be
a
meaningful
future
growth
driver
for
the
company,
with
further
improvements
in
profitability
in
fiscal
2025,”
the
company
said
in
its
earnings
release.

The
big
question
for
the
company
is
if
its
investors
will
embrace
this
new
reality.
That
will
be
up
to
Disney’s
streaming
execution
in
the
years
to
come,
and
likely,
Chief
Executive
Officer
Bob
Iger’s

still
to-be-named
successor.

Disclosure:
Comcast’s
NBCUniversal
is
the
parent
company
of
CNBC.

WATCH:
Disney
earnings
top
analyst
estimates
as
streaming
nearly
breaks
even
in
the
quarter