Walt Disney encountered a surprise surge in its streaming entertainment division’s profitability, yet this triumph was overshadowed by setbacks in its traditional TV business and a weaker box office performance. 

Consequently, Disney’s stock plummeted by 10%, marking its most significant one-day decline in 17 months.

To adapt to the shifting landscape of consumer preferences from cable television to streaming services, Disney had committed to Wall Street that its streaming operations would achieve profitability by September. 

While the streaming division, encompassing Disney+ and Hulu, reported a noteworthy operating income of $47 million for the January-March period, compared to a loss of $587 million a year prior, the combined streaming business, inclusive of ESPN+, incurred a loss of $18 million.

The decline in Disney’s traditional television business, with an 8% decrease in revenue to $2.77 billion and a 22% drop in operating profit from the previous year, underscores the challenges faced by legacy media companies amidst evolving viewer habits. 

This decline was attributed to lower ad revenue and the ramifications of Disney’s revised TV distribution deal with Charter Communications, leading to the removal of eight Disney cable networks.

Chief Executive Bob Iger acknowledged the non-linear trajectory towards profitability during an earnings call with analysts. Iger, who resumed leadership in November 2022 amidst efforts to rejuvenate Disney, implemented cost-saving measures expected to surpass $7.5 billion by September’s end. 

Additionally, plans for a standalone ESPN streaming app and a significant investment of $60 billion in theme parks signify Disney’s strategic initiatives for future growth.

Despite the setback in the streaming division’s profitability for the current quarter, Chief Financial Officer Hugh Johnston anticipates a return to profitability in the subsequent period. Disney+ witnessed a surge of more than 6 million subscribers during the quarter, contributing to a rise in average revenue per user, excluding India.

While Disney’s experiences division, including its theme parks worldwide, reported a robust operating income of $2.3 billion, a 12% increase from the previous year, the sports unit, encompassing ESPN, experienced a 2% decline in operating income, attributed to timing factors in college football playoff games.