Unexpected Strong Performance in Q3
Targeting Turnaround Next Year
Walt Disney, experiencing its greatest crisis since its founding, posted unexpectedly strong earnings. Based on intensive restructuring, the company also announced its goal to make next year the turnaround (profitability) year for its core business, online streaming (OTT).
On the 8th (local time), Walt Disney announced in its earnings report that its revenue for the third quarter of this year (the company's fiscal fourth quarter) reached $21.241 billion, a 5.4% increase compared to the same period last year. This was in line with the market expectation of $21.33 billion. Earnings per share were $0.82, significantly exceeding the market expectation of $0.69.
The third-quarter results came after completing a business unit reorganization through intensive restructuring. Walt Disney integrated its film and TV divisions into the OTT division and reorganized into three main segments: the ESPN division operating sports media, the Disney Parks, Disney Cruise Line, and Products division (Experience).
By segment, the OTT division recorded revenue of $9.524 billion, up 2% from a year ago. The net loss narrowed to $387 million compared to the same period last year. During this period, the OTT service Disney+ added 6.9 million new subscribers, bringing the total subscriber count to 150.2 million, surpassing the market expectation of 147.4 million.
The ESPN division and the Experience division saw revenues increase by 2% and 11%, respectively, compared to a year ago. CEO Bob Iger emphasized, "As the OTT business's losses continue to shrink, we expect to reach the break-even point by the third quarter of next year."
On this day, Walt Disney's stock price rose over 3% in after-hours trading, supported by the strong earnings. During regular trading hours, it closed at $84.50, down 0.11% from the previous session. This is more than a 50% drop from the historic peak of $184.52 in February 2021.
Celebrating its 100th anniversary this year, Walt Disney has struggled with deteriorating earnings and financial structure, unable to overcome the limitations of traditional media. Starting in October 1923 with the character ‘Mickey Mouse,’ it grew into a media giant encompassing animation, film, music, and broadcasting, but failed to seize the advantage amid the paradigm shift where traditional media declined and the OTT industry rose. It entered the online OTT market only in 2019, about ten years later than Netflix, which had already established itself early in 2007.
As a latecomer, Walt Disney has focused on reclaiming the market with its financial power, but results have not followed. Despite massive marketing investments, intensified competition and stagnation led to declining revenue and increasing losses. Pushed to the limit, Walt Disney brought back CEO Iger and has continued a major overhaul, including company-wide restructuring centered on the OTT business.
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