Friday, November 8, 2024

How Disney Plans to Grow Its Streaming Profit

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Disney announced a streaming profit for the first time Wednesday, and with price increases on their way and increased content offerings, CEO Bob Iger said he expects additional growth to come. 

Speaking on the earnings call Wednesday, Iger attributed the streaming achievement to the “success of our creativity,” citing the company’s 183 Emmy nominations and demand for shows such as Shogun, The Bear and Abbott Elementary. This demand, coupled with new streaming initiatives, including increased sports programming on Hulu and popular movies like Inside Out 2 eventually making their way to the service, makes Iger bullish on the service moving forward and on consumers’ willingness to tolerate price increases. 

“What we’re basically seeing is we’re seeing growth in consumption and the popularity of our offerings, which gives us the pricing leverage that we believe we have,” Iger said on the earnings call. “So every time we’ve taken a price increase, we’ve had only modest churn from that, nothing that we would consider significant.”

The price increases, which will see the monthly cost of its Disney+ ad-supported and ad-free tiers increase by $2 each, among other changes, are expected to take place Oct. 17. The increases also make The Disney Bundle, which will offer the ad tiers of Disney+ and Hulu for $10.99 per month, just slightly more than paying for one standalone service, a more valuable proposition for consumers. The move comes after Disney agreed to buy full control of Hulu from Comcast. 

Iger also mentioned Disney’s upcoming film slate, which includes Moana 2, Mufasa: The Lion King, Captain America: Brave New World, Snow White and more as coming drivers for the streaming service, after their theatrical release. 

“The goal is to grow engagement on the platform, and what I mean by that is obviously offering a wider variety of programming, which is why we’re adding news, why we’re adding the ESPN tile to it, why we’re bundling aggressively to give consumers the ability to buy across all of our basically creative engines,” Iger said on the call. “And we feel very bullish about the future of this business. We’re not saying you know much more about it, except you can expect that it’s going to grow nicely in fiscal 2025.”

Disney CFO Hugh Johnston added on the earnings call that bundling has helped cut down on churn. And he noted that the company has seen a healthy advertising market, with advertising for DTC streaming up 20 percent.

Additionally, the company began its password sharing crackdown in June, before a broader rollout in September, which is expected to drive more revenue. Iger noted that the company has had “no backlash at all” to the password sharing notifications that have already gone out. He said the company is working on improving its content recommendation engines and its marketing initiatives around streaming. 

“We were losing a billion dollars a quarter, not all that long ago, and now we’re making money, and our expectation is we’re going to continue on that journey to making more money to get to and then ultimately, well surpass the double digit margins that we’ve talked about,” Johnston said. 

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