Disney CEO Bob Iger Says Company “Embarking On A Significant Transformation” As Parks Power Quarterly Financials, Streaming Losses Narrow

As Disney reported better-than-expected financials for the fiscal first quarter, CEO Bob Iger said the company is “embarking on a significant transformation” that will reshape the company he rejoined last November.

The media giant showed improvement across a range of financial categories during the quarter ending December 31, compared with its dismal showing last November just prior to the ouster of CEO Bob Chapek. Revenue rose 8% to $23.5 billion compared with the year-ago period and earnings per share hit 99 cents, excluding certain items. Both the revenue and profit line outdid Wall Street analysts’ expectations.

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Theme parks, which have come roaring back to life after the grueling struggle with Covid, powered the quarterly performance. Revenue and operating income in the Parks, Experiences and Products division jumped 21% and 25%, respectively. The only significant blemish on the numbers was a decrease in operating days at Shangai Disneyland due to a wave of Covid shutdowns in China during the quarter.

Operating losses in direct-to-consumer streaming narrowed to $1.1 billion from $1.5 billion, which was better than the company’s forecast for a $200 million reduction. Including Disney+Hotstar, Disney+ had its first negative quarter since launching in November 2019, dropping 2.4 million customers to come in at 161.8 million. The loss of some International Premier League cricket rights accounted for the downturn in subscribers, the company said.

Outside of the Hotstar bundle, Disney+ gained 1.4 million subscribers over the previous quarter, reaching 104.3 million, in a stronger showing than executives had projected. Hulu, counting both its on-demand offering and pay-TV bundle, hit 48 million subscribers, while ESPN+ had a more moderate gain of about 600,000 subscribers to get to 24.9 million.

“After a solid first quarter, we are embarking on a significant transformation, one that will maximize the
potential of our world-class creative teams and our unparalleled brands and franchises,” Iger said in the hotly anticipated earnings release. “We believe the work we are doing to reshape our company around
creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges, and deliver value for our shareholders.”

In the Media and Entertainment Distribution unit, linear networks revenue slid 5% to about $7.3 billion, while operating income fell 16% to $1.3 billion. International channels revenue dropped 21% to $1.2 billion and operating income was down 64% to $131 million. The culprits were lower advertising revenue, an unfavorable foreign exchange impact and a decrease in affiliate revenue. Comparisons were also negatively affected by the timing of certain sports telecasts due to Covid-19.

Theatrical revenue, mainly from Black Panther: Wakanda Forever, helped content sales/licensing and other revenue inch up 1% to $2.5 billion, though operating losses nearly doubled to $212 million. Disney said the wider losses were due to lower TV/SVOD distribution results, higher overhead costs and a decrease in home entertainment distribution results. The decrease in TV/SVOD distribution results, the company said, was primarily due to lower sales volumes of both film and episodic TV content reflecting the shift from licensing content to third parties to distributing it on Disney streaming services.

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