In the most recent quarterly earnings report of The Walt Disney Co., the transformative effects of Bob Iger’s restructuring efforts are evident. The CEO revealed that the company is on track to surpass its initial cost-saving objective of $5.5 billion. This achievement has been propelled by a reduction of approximately 7,000 jobs within the last quarter, resulting in severance costs of $210 million for Disney.
Iger remarked, “In the eight months since my return, these significant changes have facilitated a more efficient, well-coordinated, and streamlined operational approach. This has positioned us to exceed our initial $5.5 billion savings goal and bolstered our direct-to-consumer operating income by approximately $1 billion across three quarters.”
He continued, expressing his confidence in Disney’s future trajectory due to the accomplished work, the capable team now in place, and the foundation of creative excellence and beloved brands and franchises that Disney possesses.
Regarding losses in the direct-to-consumer segment, there has been a notable improvement. The losses have diminished to $512 million from $1.1 billion in the previous year and $659 million in the last quarter.
While Disney’s earnings per share and income surpassed Wall Street estimates, there was a shortfall in revenue. The company reported total revenue of $22.3 billion, a 4 percent increase from the prior year, along with an operating income of $3.6 billion, maintaining consistency with the previous year’s figures.
During the quarterly earnings call, Iger identified three key areas that will drive Disney’s growth in the future: film studios, theme parks, and streaming, and all interconnected with Disney’s iconic brands and franchises.
Within its divisions, the linear TV business remains profitable yet has experienced a decline. Revenues dropped by 7 percent to $6.7 billion, and operating income declined by 23 percent to $1.9 billion. Challenges included reduced viewership and advertising revenue at ABC and escalated sports costs at ESPN, offset by elevated ad revenue at the cable sports network.
During the earnings call, Iger expanded on the company’s intentions regarding its linear businesses. An example of strategic expansion is ESPN’s collaboration with Penn Entertainment on ESPN Bet, an ESPN-branded sportsbook. This partnership involves a cash infusion of $1.5 billion and $500 million in stock warrants.
The company recently divested its approximately 5 percent stake in DraftKings, generating a gain of $90 million, likely in connection with this deal.
In direct-to-consumer operations, revenues surged 9 percent to $5.5 billion, and losses were mitigated to $512 million. Improved cost efficiency at Disney+ and ESPN+, combined with increased operating income at Hulu, contributed to these positive results. Additionally, Disney benefitted from cost savings by not renewing its Indian Premier League (IPL) deal.
However, discontinuing Disney’s IPL rights affected the total Disney+ subscriber count. While the core Disney+ subscriber base reached 105.7 million during the quarter, the Disney+ Hotstar base contracted to 40.4 million, reflecting a loss of approximately 12.5 million subscribers compared to the previous quarter.
Steady subscriber bases were observed for ESPN+ and Hulu from the preceding quarter, accompanied by improved Average Revenue Per User (ARPU) at Disney+ and Hulu due to enhanced advertising performance.
Iger disclosed plans to raise prices for ad-free tiers of Disney+ and Hulu, along with introducing a new bundle comprising both services. The company also intends to take a more assertive stance against password sharing.
Notably, Disney recently announced the removal of certain content from its streaming platforms, leading to a charge exceeding $2.4 billion, surpassing the previously predicted range of $1.5 billion to $1.8 billion.
In the film studio division, Iger emphasized elevating film quality and economics. Rather than solely reducing the number of releases, Disney aims to optimize the impact of its titles through various distribution channels, enhancing consumer accessibility.
The company anticipates its total content spending to reach $27 billion this year, a figure lower than the initial forecast, partly attributed to ongoing strikes.
Despite challenges, Iger expressed optimism about finding resolutions and working collaboratively to address the issues that have arisen.
Disney’s parks and experiences segment remains a highlight, with a 13 percent increase in revenues to $8.3 billion and an 11 percent improvement in operating income to $2.4 billion.
