The Walt Disney Company reported mixed financial results, highlighting its significant challenges in making its streaming business profitable and sustaining theme park momentum. Disney managed to narrow its streaming losses in the March quarter, but its shares fell nearly 10% after the company projected earnings growth that narrowly missed Wall Street expectations.

Streaming Business Progress Amid Criticism

Disney’s streaming unit reported a loss of $18 million in the March quarter, a substantial improvement from the $659 million loss in the same quarter a year earlier. CEO Bob Iger emphasized the company’s challenges in reaching streaming profitability despite this progress.

“Our strong performance in Q2 demonstrates we are delivering on our strategic priorities while building for the future,” Iger said during an earnings call. “Overall, this was another impressive quarter for us, with adjusted earnings per share up 30% compared to the prior year.”

Iger remains confident in Disney’s ability to achieve profitability in its streaming business by the end of the fiscal year. He reiterated that this achievement won’t follow a strictly linear path, noting that “we are anticipating a softer third quarter due in large part to the seasonality of our India sports offerings, but we fully expect streaming to be a growth driver for the company in the future.”

Disney+, the company’s flagship streaming service, added over six million subscribers in the March quarter, driven by the popular series Bluey and movies like Wish. However, the overall streaming portfolio, which includes Disney+, ESPN+, and a majority stake in Hulu, saw total subscribers rise modestly to 153.6 million from 149.6 million in December.

Disney is also working to increase and deepen customer engagement with its streaming offerings by limiting password sharing, improving its recommendation engine, and integrating new content tiles. Iger emphasized the importance of these initiatives, particularly the addition of Hulu and ESPN tiles to Disney+.

“In March, we successfully launched Hulu on Disney+, bringing extensive general entertainment content to the platform for bundle subscribers,” he explained. “And by the end of this calendar year, we will add an ESPN tile to Disney+, giving all U.S. subscribers access to select live games and studio programming within the Disney+ app.”

To curb improper password sharing, Disney will begin cracking down on unauthorized account sharing for Disney+ next month in select markets, with a global rollout planned for September.

“Obviously, we’re heartened by the results Netflix has delivered in cracking down on password sharing,” Iger noted. “We believe that it will be one of the contributors to growth.”

Despite making progress toward profitability, Disney’s streaming businesses face continued scrutiny. The company’s earnings guidance raised adjusted earnings per share growth to 25%, just shy of Wall Street’s expectation of 25.3%. Critics like Jeremy Hambly from The Quartering highlight the losses, calling Disney’s approach “woke” and attributing the financial issues to the company’s content choices.

“Disney has now lost $20 billion in market cap. Get woke, go broke. That’s right, Disney,” Hambly said.

However, CFO Hugh Johnston struck a more positive note, pointing to Disney’s long-term strategy.

“We’ve got a lot of levers that give us strong reasons to believe that there’s good growth in front of us,” Johnston said on the earnings call. He cited the crackdown on password sharing and Disney’s growing streaming portfolio as key components of the company’s growth strategy.

“We continue to expect our combined streaming businesses to be profitable in the fourth quarter and expect further improvements in profitability in fiscal 2025,” he added.

Is Disney Awake on Woke?

Disney has long been regarded as a cultural touchstone, influencing generations with its family-friendly entertainment and theme park experiences. In recent years, however, the company has faced mounting criticism over its perceived alignment with progressive ideologies and inclusivity initiatives. This critique, often summarized with the phrase “go woke, go broke,” has been amplified by political commentators and has ignited intense debates over Disney’s creative direction and corporate values.

Box Office Backlash

Critics argue that Disney’s pursuit of progressive themes has led to a string of box office disappointments. Films like Lightyear and Strange World, criticized for their overt messaging, failed to meet expectations, contributing to Disney’s nearly $1 billion in film losses in 2023 alone. Furthermore, Indiana Jones and the Dial of Destiny and The Marvels received mixed reviews and underperformed financially, signaling potential challenges in appealing to a broader audience.

The YouTube channel TheQuartering, known for criticizing Disney’s “woke” agenda, recently highlighted the company’s market cap loss of nearly $20 billion, arguing that audiences have grown weary of being “preached to.” The host noted, “Disney has now lost $20 billion in market cap. Holy smokes. Can I get a ‘get woke, go broke?’”

Disney’s Response to Critics

Despite the criticism, Disney remains resolute in its commitment to diverse and inclusive storytelling. CEO Bob Iger has consistently emphasized the importance of reflecting global audiences and fostering inclusivity in Disney’s creative output.

“We are committed to telling stories that resonate with diverse audiences around the world,” Iger said. “Our mission is to deliver content that not only entertains but also inspires and reflects the rich diversity of our global audience.”

In response to recent box office struggles, Disney has reassessed its creative strategy, reducing the output of underperforming franchises while emphasizing quality over quantity. The company announced plans to scale back Marvel releases to two or three films per year while reducing the number of Marvel TV series on Disney+.

Content and Profitability

Disney’s effort to cater to progressive audiences has also impacted its streaming services. While Disney+ achieved profitability for the first time in the March quarter, it fell short of analyst expectations, partly due to password sharing and increased competition.

“We have a responsibility to balance creative expression with profitability,” Iger noted. “While we believe in inclusivity, we are also focused on delivering content that attracts and retains a diverse subscriber base.”

Navigating Cultural Sensitivities

The company’s progressive stance has affected its creative output and led to high-profile conflicts with conservative politicians. Disney’s opposition to Florida’s Parental Rights in Education bill, known as the “Don’t Say Gay” law, resulted in a protracted legal battle with Governor Ron DeSantis.

“Disney’s fight with DeSantis has only further polarized the perception of the company,” said political analyst Alex Harris. “While it won the support of progressive audiences, it alienated some traditional Disney fans.”

Balancing Act

Disney’s quest to balance inclusivity with financial success is a complex challenge that continues to unfold. Critics argue that Disney has overcorrected in its pursuit of progressive themes, while supporters maintain that inclusive storytelling is essential for the company’s future.

“There’s a fine line between staying relevant and alienating core audiences,” media analyst Jessica Ehrlich remarked. “Disney must navigate this cultural divide carefully, ensuring that its creative direction appeals to a broad spectrum of viewers.”

Looking Forward

As Disney moves forward, the company aims to strike a balance between its progressive values and commercial success. By reducing output, focusing on quality storytelling, and carefully navigating cultural sensitivities, Disney hopes to redefine its creative direction while staying true to its inclusive ethos.

“We remain focused on delivering exceptional stories that connect with audiences worldwide,” Iger affirmed. “Inclusivity and profitability are not mutually exclusive, and we believe we can achieve both.”

While critics and supporters remain divided over Disney’s approach, one thing is clear: industry peers and audiences alike will watch closely as the company journeys toward a more inclusive and profitable future.

ESPN and Sports Segment

While Disney’s streaming businesses were a focal point, the sports segment also garnered significant attention during the earnings call, given its critical role in its overall growth strategy. ESPN and the broader sports segment were particularly affected by rising programming and production costs due to the timing of College Football Playoffs. Operating income for sports fell by 2% to $778 million despite a 2% increase in revenue to $4.31 billion.

During the call, CEO Bob Iger emphasized the importance of live sports in attracting and engaging audiences, highlighting ESPN’s role in driving growth and viewership.

“I see sports continuing to shine in a world with considerably more choice. Live matters,” Iger said. “Sports generally are driving higher engagement with streaming subscribers, and recent ratings wins across a variety of sports have proven this.”

ESPN saw a particularly strong April, achieving its highest primetime viewership for that month on record. The NCAA Women’s Final Four set a new viewership record, with the championship game between Iowa and South Carolina becoming ESPN’s most-watched college basketball game ever, regardless of gender. Furthermore, the NFL postseason broke viewership records, and Monday Night Football had its most-watched season since 2000.

Iger also underscored the strategic importance of sports in Disney’s direct-to-consumer strategy, noting that ESPN will be adding a tile on Disney+ before the end of the year. This will give all U.S. subscribers access to select live games and studio programming within the Disney+ app.

“We see this as a first step to bringing ESPN to Disney+ viewers, as we ready the launch of our enhanced standalone ESPN streaming service in the fall of 2025,” Iger noted.

Given the growing value of sports content, ESPN is also engaged in high-stakes negotiations with the NBA for a new rights package. Iger expressed optimism about securing a long-term deal that aligns with the company’s best interests.

“We’re confident or optimistic we’re going to end up with an NBA deal that will be long-term in our best interest and the best interest of our subscribers,” he said.

However, challenges remain, particularly in ESPN’s traditional linear business, which suffers from declining viewership and lower affiliate revenue due to cord-cutting.

Hugh Johnston, Disney’s CFO, acknowledged these challenges but emphasized that the company is well-positioned to navigate them due to its extensive sports rights portfolio.

“First of all, we’ve locked up long-term deals with significant sports organizations, including the college football championships, all the NCAA championships, and the NFL,” Johnston said. “We’re also confident that our strategic partnership with Fox and Warner Bros. Discovery on a new sports-streaming service will drive growth.”

In addition to these partnerships, Disney’s sports business includes ESPN+ and a majority stake in Hulu, home to popular sports-themed shows like Shōgun and The Bear. Iger emphasized leveraging the company’s entire portfolio to maximize this content’s potential.

“Our linear channels are deeply embedded in our direct-to-consumer strategy, as they continue to deliver high-quality content that reaches demographics not captured on streaming alone,” he said.

With these strategic moves, Disney aims to maintain its leadership in the sports entertainment segment and ensure ESPN remains a key driver of growth and profitability.

Star India and the Impact of Cricket Rights

Disney’s global sports ambitions took a hit in the most recent quarter due to significant challenges its Star India subsidiary faced and the loss of critical cricket broadcasting rights. The company took a $2 billion impairment charge related to its Star India operations and linear television networks, swinging Disney to a loss of $20 million for the quarter, compared to a net income of $1.27 billion in the same period last year.

Star India, once considered a crown jewel in Disney’s 2019 acquisition of 21st Century Fox, encountered significant challenges after losing key cricket rights. These rights had previously attracted a substantial audience to Hotstar’s streaming platform. With the loss of the Board of Control for Cricket in India (BCCI) rights, Disney+ Hotstar saw many customer cancellations. The impairment charge reflects that the value of Star India is now approximately $2 billion less than its initial purchase price.

Disney CFO Hugh Johnston explained the impact of losing cricket rights: “The impairment indicates that the India business is today valued at about $2 billion less than when Disney first purchased it. Losing key cricket rights undoubtedly affected subscriber growth for Disney+ Hotstar.”

Despite these challenges, Johnston noted that Disney remains committed to the Indian market and is working to stabilize Star India’s business by enhancing its programming mix. The company is also exploring strategic partnerships to revitalize growth.

“We’re focused on diversifying the content portfolio on Disney+ Hotstar to offer a broader mix of sports, entertainment, and local programming,” Johnston said. “We’ve already seen a positive response to our new programming initiatives and are confident that we can regain traction.”

Moreover, Bob Iger highlighted the company’s intent to remain competitive in India’s burgeoning streaming market by improving customer engagement and leveraging Disney’s rich global content library.

“We have prioritized efforts to deepen customer engagement, including limiting password sharing and improving the recommendation engine on Disney+ Hotstar,” Iger stated. “We’re also integrating a new Hulu tile and planning to add an ESPN tile to Disney+ before the end of the year.”

However, the company anticipates further losses in the third quarter for its entertainment direct-to-consumer business due to the cost of the International Cricket Council (ICC) cricket rights. The ICC rights are crucial for maintaining Star India’s competitive edge, and Disney is banking on these rights to revitalize Hotstar’s subscription growth.

“We remain optimistic about the potential of Star India and Disney+ Hotstar,” Iger emphasized. “Sports, particularly cricket, will continue to be a strategic focus for us in the region, and we’re taking steps to ensure we’re well-positioned for future growth.”

In addition to cricket rights, the company also focuses on improving profitability through cost rationalization and strategic partnerships with local players.

“We’re committed to improving operational efficiency at Star India while exploring new partnerships to enhance our content offerings,” Johnston added. “Ultimately, we believe these efforts will help us achieve sustainable profitability in this market.”

Despite recent setbacks, Disney remains determined to maintain a strong presence in India, recognizing the immense potential of its fast-growing streaming audience.

Theme Parks and the Magic Kingdom’s Post-COVID Magic

Disney’s theme parks, a cornerstone of the company’s profitability, remain a vital part of its business. Despite revenue increasing 10% to $8.39 billion for the March quarter and operating income rising 12% to $2.29 billion, there are growing concerns over the sustainability of this growth. Bob Iger acknowledged the parks segment’s challenges in maintaining post-COVID demand while navigating rising costs.

“We’re seeing some evidence of a global moderation from peak post-COVID travel, and this is impacting demand at our parks,” Iger stated during the recent earnings call. “However, we’re still confident in the long-term growth potential of our parks and experiences business.”

The Magic Kingdom and its broader experiences segment are fundamental to Disney’s profitability, but the company noted that operating income for the segment is expected to be flat in the June quarter, a significant deviation from analyst expectations of 12% year-over-year growth. Factors influencing this include pre-opening expenses for the new Disney Treasure and Disney Adventure cruise ships and higher labor expenses due to inflation.

“Rising wage expenses and inflation continue to weigh on near-term profitability,” said Disney CFO Hugh Johnston. “However, we’re confident that demand remains healthy, and we’re already seeing bookings showing strong growth for the remainder of the year.”

Despite these headwinds, Disney is optimistic about its strategic investments in the experiences segment. The company recently launched its Disneyland Forward initiative to expand the Disneyland Resort in California with new attractions and immersive experiences. Meanwhile, Disney Cruise Line is gearing up to introduce Lookout Cay, a new private island destination, along with two new cruise ships.

“Our investments in the Disneyland Forward initiative, the expansion of Disney Cruise Line, and our long-term plans for Walt Disney World will turbocharge growth in this segment,” Iger emphasized. “We’re working to bring new and compelling stories to life across all our parks and experiences, ensuring that guests have magical experiences that will keep them coming back.”

Additionally, Disney remains focused on optimizing guest experiences through its Genie+ and Lightning Lane services, which provide guests with more personalized itineraries and shorter wait times for popular attractions. The company is also investing heavily in technology to enhance the customer journey, from mobile ordering at restaurants to virtual queues at attractions.

“Enhancing the guest experience is at the core of everything we do,” Iger remarked. “Our technology investments and strategic pricing adjustments are designed to ensure that every guest has a magical and memorable visit, regardless of the park they visit.”

Disney has a slate of highly anticipated theme park expansions and projects that will help maintain its leadership position in the global theme park industry. The planned opening of new attractions tied to popular franchises like “Avatar” and “Indiana Jones” is expected to draw significant interest.

“Avatar, Moana, and Indiana Jones are just a few of the stories we’re bringing to life in our parks,” Iger noted. “These projects will continue to set Disney apart and keep the magic alive for millions of guests worldwide.”

However, challenges remain as the company grapples with inflationary pressures, evolving consumer preferences, and growing competition from rival Universal Studios, which plans to open a new theme park in Orlando next year.

“Universal’s expansion highlights the increasing competition in the industry,” Johnston stated. “But we’re confident that our unmatched storytelling, innovative technology, and focus on quality will ensure that Disney remains the premier destination for families worldwide.”

Despite the uncertainties, Disney’s long-term investment in its parks, cruises, and resort experiences positions the company to capture continued growth in the global travel and leisure industry, which is still recovering from the effects of the pandemic.

Cost-Cutting and Content Strategy

Amid the challenges in streaming and theme parks, Disney has been actively pursuing cost-cutting measures to streamline its business and improve profitability. Since returning as CEO, Bob Iger has made significant strides in implementing a leaner organizational structure and focusing on quality over quantity in the company’s content strategy.

“We’re firmly committed to achieving sustainable profitability,” Iger said on the recent earnings call. “Our restructuring efforts and strategic focus on high-quality content have positioned us well for the future.”

Disney recently announced a plan to cut $7.5 billion in annual costs, including reducing its workforce by approximately 7,000 employees. These cost-cutting measures will primarily affect the company’s marketing, administrative, and content production divisions. The aim is to shift resources toward high-impact projects with the greatest profitability potential.

Disney’s CFO Hugh Johnston emphasized these efforts’ significance: “We’ve already achieved considerable progress in our cost-efficiency initiatives. Our new organizational structure and reduced content spend will provide us with greater flexibility to navigate a dynamic market.”

In the content production segment, Disney is reevaluating its slate of projects, particularly at Marvel and Lucasfilm, to focus on fewer high-quality productions. “We’ve been working with the studio to reduce output and focus more on quality, particularly within our Marvel projects,” Iger said. “Reducing the number of films and series allows us to concentrate on developing exceptional stories that resonate with audiences.”

This shift was evident in Disney’s decision to limit its Marvel Cinematic Universe releases to two or three films per year and reduce the number of Marvel series on Disney+ from four to two. Iger explained that the company wants to reinvigorate the Marvel brand by returning to a model that prioritizes event-level releases, like “Avengers: Secret Wars” and “Deadpool & Wolverine.”

“At Marvel, we are reimagining our approach to storytelling by ensuring that every film and series we produce is unique and impactful,” Iger noted. “With reduced output, we can dedicate more time and resources to creating compelling, high-quality content.”

Additionally, Disney is banking on the power of its legacy franchises, such as Star Wars, Indiana Jones, and Avatar, to drive both box office and streaming revenues. With new projects in development for each brand, the company aims to captivate audiences across all age groups.

“Kingdom of the Planet of the Apes” is set for release this weekend, while Pixar’s “Inside Out 2” and Marvel’s “Deadpool & Wolverine” are slated for later this year. Iger remains optimistic about the company’s upcoming slate: “Our studios continue to deliver top-tier content that resonates with audiences globally.”

Meanwhile, Disney is exploring potential licensing opportunities to generate additional revenue from its vast content library. While exclusive streaming rights remain crucial to driving subscriber growth on Disney+, Hulu, and ESPN+, Iger noted the strategic benefits of third-party licensing.

“We’re being more expansive in our thinking about content licensing,” Iger said. “We recognize that certain opportunities can amplify the value of our IP and create new revenue streams.”

However, the company remains committed to maintaining the core of its marquee content on its streaming platforms, leveraging the power of its library to bolster engagement and retain subscribers.

“Ultimately, our goal is to strike the right balance between licensing and exclusivity, ensuring that our streaming platforms continue to offer a unique and compelling experience for our customers,” Iger emphasized.

By optimizing its cost structure and refining its content strategy, Disney aims to navigate the turbulent media landscape and return to sustainable growth across all business segments.

Looking Forward

As Disney embarks on its journey toward sustainable profitability, it faces several challenges and opportunities that will define its future. CEO Bob Iger remains optimistic about the path ahead and has outlined a strategic plan that leverages Disney’s extensive content library, strong brand portfolio, and innovative technological capabilities.

Streaming Business Profitability In the streaming segment, Disney remains focused on achieving profitability by the end of fiscal 2024. Iger emphasized the importance of subscriber growth and retention through high-quality content, a revamped user interface, and innovative technological solutions like password-sharing crackdowns.

“We’re on track to deliver profitability in our combined streaming business in the final quarter of this fiscal year,” Iger stated. “By enhancing the Disney+ experience with Hulu and ESPN tiles and cracking down on password sharing, we expect to see a significant boost in engagement and revenue.”

Disney also prioritizes advertising revenue by expanding its ad-supported tier across streaming platforms. CFO Hugh Johnston noted, “Our ad tier subscriber growth is encouraging, and we continue to invest in improving our recommendation engine and direct-to-consumer marketing efforts.”

ESPN’s Transition to Digital With ESPN preparing to launch its standalone streaming service in 2025, the company is paving the way for a new era of sports consumption. “ESPN will continue to be a premier destination for sports fans worldwide,” Iger said. “By offering a seamless blend of linear and digital programming, we believe the ESPN flagship streaming service will redefine sports viewing.”

The ESPN tile on Disney+ is expected to engage current subscribers and offer a glimpse into ESPN’s broader sports ecosystem, driving further interest in the standalone service. “We’re confident that the ESPN streaming service will deliver a compelling experience, building on the success of our existing ESPN+ platform,” Johnston added.

Reinvigorating Content Strategies In the coming years, Disney’s studios will focus on revitalizing their major franchises while exploring new and original stories that captivate audiences. The balance between sequels and fresh IP will maintain relevance across age groups and drive box office and streaming revenues.

“We are reducing output to prioritize quality over quantity,” Iger explained. “Whether it’s Marvel, Star Wars, or Pixar, our goal is to deliver memorable stories that resonate deeply with our audience.”

Disney’s strategic decision to limit Marvel releases to two or three films per year while reducing the number of Marvel series on Disney+ reflects this commitment to quality storytelling.

Expanding International Presence Despite recent challenges in India, Disney is determined to expand its international footprint. The new partnership with Reliance Industries and Viacom18 is expected to help Disney regain lost ground and provide a framework for future international collaborations.

“Our partnership in India will enable us to explore new markets while ensuring profitability and growth for Disney+ Hotstar,” Johnston said.

Reviving the Magic at Theme Parks While the theme park segment faced setbacks due to COVID-19 and economic challenges, Disney remains confident in the resilience of its experiences business. With new attractions and immersive experiences on the horizon, the parks division is poised for continued growth.

“Theme parks are a cornerstone of our business,” Iger noted. “We’re excited about the future with new attractions like the Disneyland Forward initiative and the Disney Treasure cruise ship.”

Despite moderating post-COVID demand, Disney plans to invest $60 billion over the next decade in parks, cruise lines, and resorts. “These investments will enhance our guests’ experiences and deliver long-term growth,” Johnston said.

Sustained Financial Stability With a clear strategic vision and continued investment in quality content, technology, and international expansion, Disney aims to achieve sustained financial stability. The company is also prioritizing shareholder returns through stock buybacks and dividend payouts.

“We’re committed to delivering long-term value for our shareholders,” Johnston emphasized. “Our cost-efficiency initiatives, combined with strategic investments and content quality, will pave the way for robust earnings growth.”

As Disney navigates the dynamic media landscape, it remains a cultural and entertainment powerhouse committed to delivering exceptional experiences for audiences worldwide.