The Walt Disney Company has reported a 27% jump in operating income from all segments – entertainment, sports and experiences – in the first quarter earnings released on Thursday.
However, the company’s overall revenue for the quarter ending December 31, 2023, remained nearly flat at $23.55 billion compared with $23.51 billion in the same quarter previous fiscal.
During the earnings call, CEOBob Igersaid, “The important transformation we undertook last year is bearing fruit. And looking at our results this quarter, we can say with confidence our strategy is working. In Q1, segment operating income increased by 27% and adjusted earnings per share rose 23% compared to prior year.
“We’ve improved our entertainment streaming operating income by a remarkable 86% year-over-year, and remain poised to reach profitability in our combined streaming business by the end of FY 24, and build on our momentum to deliver significant, sustained profit margins in the future.”
The operating income from all segments stood at $3.8 billion in Q1 FY24, up by 27% in Q1 FY23.
Walt Disney’s operating income in the entertainment sector for Q1 FY24 was at $874 million, up from $345 million in the same quarter previous year.
However, its revenue fromentertainment(linear + direct-to-consumer + content sales/licensing) stood at $9.9 billion in Q1, down by 7% from $10.6 billion in the same quarter previous year.
The company’s revenue from linear network in entertainment stood at $2.8 billion in Q1 FY24, down by 12% from the previous fiscal.
The company said it was due to loweradvertisingand affiliate revenues, partially offset by lower programming and production costs.
The revenue from experiences stood at $ 9.1 billion in Q1 FY24, up by 7% from the corresponding quarter previous fiscal.
In the sports segment, the overall revenue of the company was up by 4% to $4.8 billion, out of which, the revenue from Star India was $399 million, up by 71% in Q1 FY24 from $233 million in Q1 FY23.
The operating loss in sports in Q1 FY24 was recorded at $103 million, 37% down from $164 million last fiscal.
The company reported an increased operating loss of $ 315 million in sports segment from Star India alone in the first quarter of FY24. The loss was $129 million in Q1 FY23.
According to the company, the increase in operating loss at Star was due to the airing of the ICC Cricket World Cup in the current quarter compared to the ICC T20 World Cup in the prior year quarter, which resulted in an increase in programming and production costs attributable to higher average costs per match and more matches aired.
Walt Disney also said that this also led to advertising revenue growth due to more units delivered and an increase in average viewership, partially offset by a decrease in rates.
“Sports operating income improved versus the prior year due to strength at ESPN, partially offset by lower results at Star India driven by higher rights costs from airing of the ICC cricket World Cup,” it also said.
Total expenses in Q1 were down 4% versus the prior year, said company CFO Hugh Johnston.
“We are also still on track to generate about $8 billion in free cash flow this fiscal year. Putting all this together, we are confident in the progress we're making and the path it puts us on to become a strong cash generator and earnings compounder, starting in fiscal 2024. To that end, we expect full year fiscal 2024 earnings per share, excluding certain items, to increase by at least 20% versus 2023, to approximately $4.60,” he said.
The number of subscribers of Disney+ have decreased by 1.3 million in Q1 FY24 from Q4 FY23, while Disney+ Hotstar saw a 2% increase in its subscribers at 38.3 million.
Walt Disney’s revenue from DTC streaming services, which consists of the Direct-to-Consumer line of business in the Entertainment segment and ESPN+ in the Sports segment, stood at $6 billion, up by 14% from 5.3 billion in the same quarter last fiscal.
The CEO said that ESPN’s domestic sports business continues to grow, and even amid a challenging linear landscape, ESPN increased its overall audience in calendar year 2023, and it continues to break records in ratings.
“Ultimately, our mission is to make ESPN into the preeminent digital sports brand, reaching as many sports fans as possible and giving them even more ways to access the programming they love, in whatever way best suits their needs,” he said.
Iger also announced that ESPN's channels will now be available direct-to-consumer as part of a joint venture with Fox and Warner Brothers Discovery to create a new sports streaming service.
“In the fall of 2025, we'll be offering ESPN as a stand-alone streaming option with innovative digital features creating a one-stop sports destination unlike anything available in the marketplace.
“This service will bring together our collective portfolios of sports channels and direct-to-consumer services on a non-exclusive basis, providing consumers with more of the sports they want in a single place,” Iger said during the earnings call, adding that it is important to serve the needs of consumers looking for a seamless way to access an aggregated collection of sports-centric content.
