Disney’s streaming video business losses swell to $393M

Disney's direct-to-consumer and international business segment will include the upcoming Disney+ streaming service. (Disney)

Disney’s direct-to-consumer and international business—which houses ESPN+, Hulu and the upcoming Disney+—saw its losses soar to $393 million during the company’s fiscal second quarter.

Those losses were up more than 100% compared to the $188 million lost during the year-ago quarter. But revenues for the segment rose 15% from $831 million to $955 million.

Disney pegged the expanded loss on investment in ESPN+, costs associated with the upcoming launch of Disney+, a loss from the consolidation of Hulu and higher losses from streaming technology services, all of which was partially offset by an increase at the company’s international channels.

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Because the $72 billion Fox deal (which gave Disney a controlling interest in Hulu) was completed during the previous quarter, 100% of Hulu’s operating results from March 20, 2019, to March 30, 2019, were included in Disney’s direct-to-consumer and international segment results.

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“The positive response to our direct-to-consumer strategy has been gratifying, and the integration of the businesses we acquired from 21st Century Fox only increases our confidence in our ability to leverage decades of iconic storytelling and the powerful creative engines across the entire company to deliver an extraordinary value proposition to consumers,” said Disney CEO Bob Iger in a statement.

Disney’s consolidated revenue rose 3% to $14.9 billion but operating income fell 10% to $3.8 billion. Revenues at media networks remained flat and operating income for the segment fell 3%. Cable networks revenues grew 2% and operating income rose thanks to improved performance at ESPN, which Disney said was due to higher affiliate revenue.

Disney’s broadcasting business saw a precipitous drop in operating income due to higher programming costs, lower program sales and a decrease in advertising revenue.

Studio entertainment revenues fell 15% and operating income for the segment fell 39%. Those results were partially offset by increased TV and SVOD distribution, which Disney attributed to the adoption of new revenue accounting guidance that contributed $71 million thanks to a change in the timing of revenue recognition at its TV/SVOD distribution business.