Disney Streaming Turns Profit, Signals New Leadership Path

Key Takeaway

• Disney's streaming services, including Disney+ and Hulu, report their first profit of $47 million in Q2 2024, highlighting a strategic success.
• Bob Iger's succession plan focuses on leaders from the streaming division amid pressures for cost-cutting and efficient management.
• Despite a $20 million net loss in Q1, strategic adjustments have significantly reduced the streaming unit's operating loss to $18 million.

Succession and Strategy Shifts

As Bob Iger prepares to conclude his second tenure as Walt Disney's chief executive in 2026, the company is actively considering successors, with a notable shift towards candidates possibly emerging from its streaming division. This strategic pivot comes in the wake of pressures from activist investor Nelson Peltz, whose campaign, despite not securing him a board seat, has influenced Disney's direction towards cost-cutting and meticulous succession planning. Disney's stock has seen a 16% increase this year, reflecting investor approval of these adjustments. Internal candidates for Iger's position include Josh D’Amaro, head of parks and cruises, and co-heads of entertainment Alan Bergman and Dana Walden, indicating a diverse pool of leadership talent within Disney.

Financial and Operational Highlights

Disney's recent financial performance underscores the challenges and triumphs across its diverse portfolio. The company's parks division, a significant source of income, faces a normalization in demand post-pandemic, despite an increase in average ticket prices and expansion efforts. Conversely, the traditional TV segment and film productions have experienced setbacks, with revenue declines and high-profile flops marking a period of adjustment. However, strategic cost reductions in the entertainment division have notably lessened the streaming unit's operating loss to $18 million in the first quarter, a substantial improvement from the previous year, though Disney posted an overall $20 million net loss for the quarter.

Streaming Achieves Profitability

In a significant milestone, Disney's streaming services, including Disney+ and Hulu, reported a $47 million profit in the second fiscal quarter of 2024, marking the first instance of profitability since Disney+ was launched in late 2019. This achievement, attributed to cost-cutting measures and the success of Hulu programs, signals a strategic win for Disney, aligning with Bob Iger's vision of streaming as an essential component of Disney's future. Despite an anticipated short-term loss due to Disney+ Hotstar in India, the streaming unit is expected to return to profitability by autumn, with further improvements projected for the next year.

Management Quotes

• Bob Iger, CEO of Walt Disney:

  "Succession planning is top of mind for Disney’s board."

• Josh D’Amaro:

  "Parks remain a vast source of operating income for Disney, and the largest area of employment. Average ticket prices are rising and the company is engaged in a push to expand the business — betting on more sales for in-person entertainment."

• Alan Bergman and Dana Walden:

  "Revenue decline in Disney’s traditional TV business in the first three months of the year... Expensive film flops including The Marvels, the latest instalment in Disney’s tired Marvel franchise... But they can take credit for entertainment cost cuts that helped the streaming unit to post an operating loss of $18mn in the first three months of the year."