It’s official: Disney’s streaming business is profitable now.
Last quarter, Disney’s combined streaming portfolio – Disney+, Hulu and ESPN+ – turned a profit for the first time, bringing in $47 million from April through June. It’s quite the bounceback from this time last year, when Disney’s media and entertainment segment lost $512 million.
“We were losing a billion dollars [per] quarter not all that long ago, and now we’re making money,” CFO Hugh Johnston told investors during the company’s earnings call on Wednesday.
ESPN+ helped the company start turning a profit from its combined streaming business one quarter earlier than expected.
Overall revenue from ESPN rose 5% year over year, while ad revenue alone jumped 17% YOY. And without ESPN+, Disney actually reported a $19 million loss for its streaming business. (Disney reports ESPN+ as sports revenue and Disney+ and Hulu as direct-to-consumer.)
In other words, Disney has ESPN to thank for its streaming growth.
Going forward, “the goal is to grow engagement on the platform [by] offering a wider variety of programming,” said CEO Bob Iger during Wednesday’s earnings call. “Which is why we’re bundling aggressively and adding the ESPN tile to [Disney+].”
Disney’s profit bundles
ESPN is helping Disney grow both ad and subscription revenue.
Content bundling helped subscriber retention, Johnston said, because viewers don’t have to navigate multiple apps to find what they want to watch. Earlier this year, Disney added Hulu content onto Disney+, and later this year it will do the same with ESPN+.
Bundling also attracts higher ad budgets. “Selling audiences rather than just selling streaming channels enables advertisers to more effectively target the audiences they’re seeking,” Johnston said. Last quarter, Disney’s streaming ad revenue jumped 20% YOY, he added.
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Disney also plans to gain subscribers – and streaming revenue – with a combination of anti-account-sharing tactics and price hikes. Disney began its crusade against password sharing in June, and it plans to ramp up its efforts in September.
Its confidence in its ability to gain subscribers through bundling and anti-password sharing explains the latest round of price hikes Disney announced earlier this week. Now, ad-supported and ad-free Disney+ both cost an additional $2 per month, or $9.99 and $15.99, respectively.
Also increasing by $2 per month is Disney’s bundle trio with Disney+, Hulu and ESPN+, which now costs consumers $16.99 for basic (ad-supported Disney and Hulu) or $26.99 for premium (ad-free Disney and Hulu).
“Price increases only cause modest churn,” said CEO Bob Iger during Wednesday’s earnings call. And the more Disney improves its user experience and raises engagement, he said, the more “pricing leverage we believe we have.”
