Disney+, Hulu Join the Ranks of Profitable Streamers for the First Time; Full DTC Profitability on Pace for Q4

There have been a lot more hits than misses for Disney CEO Bob Iger recently. Iger is fresh off a big win in a proxy fight initiated by activist investor Nelson Peltz, and this week he gets to announce to the world that his entertainment streaming services Disney+ and Hulu have finally achieved a goal that Iger has been pushing them toward since he rejoined the company in 2022: profitability. Disney’s streamers aren’t completely out of the woods in terms of generating a steady profit yet, but they have vindicated Iger’s strategy for them since he returned to the chairman seat 18 months ago.

Key Details:

• Disney+ and Hulu combined to show a profit of $47 million in the most recent quarter.
• ESPN+ lost $65 million but improved its losses from the year-ago quarter.
• Iger has explored drastic moves but has generally stuck with smaller course corrections to bring Disney+ and Hulu to profitability.

Disney’s earnings report for its second fiscal quarter of 2024 (the period between the start of January and the end of March) showed that its entertainment streaming services Disney+ and Hulu pulled in a profit of $47 million. ESPN+ lost $65 million, so the company’s entire direct-to-consumer (DTC) segment can’t claim profitability quite yet, although the CEO says that the company remains on target to hit that milestone in Q4. Overall, the DTC segment of Disney lost $18 million during the quarter.

That’s a far cry from the results Disney’s streamers showed after the conclusion of the company’s second fiscal quarter of 2023. During the corresponding quarter last year, the company saw streaming losses of $659 million in total. Disney+ and Hulu combined to lose $587 million during that period, and ESPN+ contributed another $72 million in losses.

Disney+ and Hulu join Netflix and Max as the only other major streaming services in the United States to report showing a profit. Netflix has been a profitable business for years, but Max only inched into the black for the first time during the fourth quarter of 2023.

How Has Disney Achieved Streaming Profitability At Last?

When Iger first returned to Disney in November 2022, he found a company in turmoil. His hand-picked successor Bob Chapek seemed to have a strategy, but there was little confidence from the company’s board that he could execute that strategy effectively, which led to his ouster.

Iger seemed to get the ball rolling on several projects that helped Disney improve its streaming margins. The biggest win for Iger was finally beginning the process of purchasing Comcast’s third of Hulu from that company, which has allowed Disney to start moving Hulu titles to Disney+ in favor of a one-app streaming experience that boosts engagement and gives customers more ways to watch video using fewer services.

Another consequential move by Iger in his second stint as Disney CEO was to essentially pull the company out of the Indian streaming market. The company’s Indian streaming platform Disney+ Hotstar lost out on rights to Indian Premier League Cricket in summer of 2022, which caused a mass exodus of Indian subscribers from the service. Iger decided to cut the company’s losses in order to focus on markets that bring in a higher average revenue per user (ARPU), and sell majority control of its Star operations, including linear networks and streaming services earlier this year.

Other moves that could have had big ripple effects on Disney’s streaming services were considered but ultimately rejected by Iger. Last summer, the CEO said that linear channels like ABC weren't necessarily “core” parts of the business, and he even engaged in preliminary discussions to sell some networks. However, having linear networks to televise the company’s wide range of live sports rights and other programming is still key as it continues to build up its streaming presence.

Despite recommendations from a few big-time investing firms, Disney’s board overwhelmingly backed Iger in the company’s recent proxy fight. That decision is looking better every day, as Disney+ and Hulu achieved profitability two full quarters ahead of Iger’s own prognostications this year. The future looks bright for Disney’s DTC segment if it remains on the path set for it by Iger.