Disney is surrounded by streaming competitors, but at least its balance sheet has improved.
The House of Mouse is on track for its combined streaming offerings to reach profitability by the end of this year, CEO Bob Iger told shareholders during the company’s Q2 earnings call on Tuesday. Disney’s streaming division for “entertainment” (as opposed to sports, for example) is now profitable.
Achieving profitability represents a major bounce-back from when Disney reported a $1.5 billion operating loss on the streaming business just 18 months ago.
Now, the business is buttressed by growing ad revenue, as well as new subscription sign-ups.
Disney+ gained 6.3 million total subscribers last quarter, and its ad-supported tier now has a grand total of 22.5 million subscribers.
Additional sign-ups for ad-supported content contributed to Disney’s 13% year-over-year streaming revenue growth, plus a 6% YOY increase in average revenue per user.
Continued growth, however, will hinge on bundling its streaming properties (Disney+, ESPN+ and Hulu) and its management of sports media.
Behold the bundle
Disney cites bundling as one of the biggest drivers of subscriber growth.
After a carriage rights dispute with Charter over the summer, Disney and Charter agreed to make ad-supported versions of Disney+ and ESPN+ available for some Spectrum cable TV plans. This distribution deal is one contributor to Disney’s new ad-supported viewers, according to Hugh Johnston, CFO and senior EVP.
Disney is also condensing its streaming offerings into a single app. Earlier this year, Disney made Hulu content available on Disney+ and combined Disney+ and Hulu ad campaigns. “We’re encouraged by the early results,” Iger said, although he didn’t share specifics.
By the end of this year, Disney+ will also feature an ESPN tile, which users can click to access ESPN’s content library (similar to the current integration of Hulu).
Putting ESPN on the Disney+ app “is the first step to making sports [more widely] accessible ahead of launching our standalone ESPN streaming service in 2025,” Iger said.
Disney’s sporting chance
For Disney, live sports viewership is growing especially quickly.
Last month’s viewership numbers for ESPN were the highest it’s had during an April month since 2012, Iger said.
ESPN’s domestic ad sales jumped 20% YOY thanks to a strong month of sports viewership. Iger cited the NCAA playoffs as an example of a growth driver. Both men’s and women’s tournaments generated big ratings and sports media numbers across the board.
Live sports are in a growth spurt, which is why Disney has big plans for ESPN. In addition to making ESPN available on Disney+ and as a standalone app, Disney is including some ESPN content in its sports-focused streaming venture with Fox and Warner Bros. Discovery.
At the end of the year, Disney+ “will have a modest amount of ESPN programming,” Iger said. Disney will gradually introduce sports to Disney+, since those viewers aren’t as accustomed to watching it.
In short, Iger said, the plan for ESPN is to “pivot toward digital, but without abandoning linear.”
