Disney pares streaming losses, takes hit from India deal

Summary
The entertainment giant added streaming customers as it swung to a loss as a result of a charge from an India media venture.Disney is getting closer to its goal of breaking even in streaming this year, paring direct-to-consumer losses in its first quarterly earnings since Chief Executive Bob Iger fended off dueling proxy campaigns.
The media giant’s streaming unit lost $18 million in the March quarter, an improvement from a $659 million loss in the year-earlier quarter. Iger said the company is on track to achieve streaming profitability in the final quarter of the fiscal year that ends in September.
The company’s flagship Disney+ streaming service—home to movies such as “Wish" and TV shows including “Bluey"—added more than six million customers in the March quarter, meeting a rare subscriber forecast it provided investors in February.
Iger is in the throes of building a streaming-centric future for the entertainment giant as cable viewership declines. He has spent the past year aggressively cutting costs, modernizing ESPN and reinvigorating Disney’s studios after box-office stumbles.
As part of that right sizing, Disney merged its Star India operations—which includes its TV networks and the Hotstar streaming service—into a new joint venture with Reliance Industries and Viacom18. The company took a roughly $2 billion charge in the March quarter related to the India deal and to its linear television networks and swung to a loss of $20 million, from net income of $1.27 billion a year earlier.
Companywide revenue rose about 1% to $22.08 billion in the March quarter.
Disney bought the India business in 2019 as part of its $71.3 billion acquisition of most of 21st Century Fox’s global entertainment assets. It was considered a crown jewel of the deal, largely because of several key packages of cricket rights that Star held. When the company lost some of those rights, customers canceled.
The impairment indicates that the India business is today worth about $2 billion less than when Disney first purchased it, Disney Chief Financial Officer Hugh Johnston said.
Disney last month triumphed over activist investors Nelson Peltz, who unsuccessfully sought a board seat and pushed for budget cuts and other measures, and Blackwells Capital.
Corporate expenses jumped $112 million for the quarter to $391 million, as a result of costs related to its proxy battle—one of the most expensive shareholder fights ever—and annual meeting, as well as higher compensation and other cost inflation. Iger’s total compensation doubled in fiscal 2023 from the previous year to $31.6 million.
Shares are up 29% so far this year through Monday’s close.
The number of domestic Disney+ subscribers rose to 54 million in the March quarter from 46.1 million at the end of December. Overall global subscribers to Disney+, including its Hotstar service in India, increased to 153.6 million in the March quarter, from 149.6 million at the end of December.
As the company pushed toward streaming profitability over the past year, it cut content, marketing and administrative spending, including writing off the cost of shows it removed from its streaming services. Today, the company’s entertainment division is no longer as focused on write-downs, said Johnston.
“The focus is as much as anything on how to produce great content at less cost," Johnston said. “That’s more where the energy is than writing off old content."
The company’s streaming business includes Disney+, ESPN+ and a majority stake in Hulu, home to fare such as “Shōgun" and “The Bear." It is also working to create a stand-alone direct-to-consumer offering of its flagship ESPN TV channel and is joining with Fox and Warner Bros. Discovery on a new sports-streaming service that offers all of their live-sports programming.
Disney’s sports segment was hit during the quarter by increased programming and production costs related to the timing of College Football playoffs as well as lower affiliate revenue from cord-cutting. Sports revenue rose 2% to $4.31 billion, while operating income in the business fell 2% to $778 million.
Excluding sports, Disney’s streaming business earned a profit of $47 million for the quarter.
Sports are coveted assets for streaming services and cable companies alike vying for customers. Disney, a major TV partner to the National Basketball Association, is in the midst of a high-stakes battle for a new rights package.
Disney’s traditional TV business continues to suffer from declining viewership and was hurt in the quarter by a decline in advertising revenue. It also brought in lower affiliate revenue as a result of its new deal with Charter Communications, which includes the cable giant dropping eight of Disney’s cable networks. In return, Disney will get paid for its Disney+ service, which Charter offers to a majority of its customers.
The experiences division, which includes theme parks, cruises, videogames and consumer products, was a bright spot for the quarter.
Revenue increased 10% from a year earlier to $8.39 billion, while operating income rose 12% to $2.29 billion, partly the result of higher average ticket prices. Income rose at Florida’s Walt Disney World and the cruise segment, but fell at Disneyland Resort in California, where costs rose because of inflation, Disney said.
Write to Robbie Whelan at robbie.whelan@wsj.com