Disney on Wednesday reported a surge in profitability for its direct-to-consumer segment in the first three months of 2025, alongside subscriber gains for Disney+ and Hulu SVODs.
On the company’s fiscal year 2025 Q2 earnings call, Disney CEO Bob Iger said the company desires and is optimistic on its ability to execute “to turn the streaming business into a true growth business” and outlined three pillars underlying the strategy to do so.
The first is continued and further integration of Hulu and Disney+ together within one user experience – with more to come when it launches a flagship ESPN direct-to-consumer product that’s expected in the coming months. When that launches Disney plans “to be really smart about bundling” it, Iger said, adding that bundled subscribers of all three streaming services will get a fully integrated experience.
The second streaming growth focus is technology, including ongoing efforts around paid sharing, as well as starting to put a lot more work into personalization, customization and the ad-tech side. And those tech advancements aren’t in the distant future.
“We’re talking about near-term where the technology improvements to the platforms will be significant,” he said.
Disney’s third pillar to fuel streaming growth is investment in content, particularly outside of the US. Iger said the company knows it needs to invest more in local content and has already started the process, including more aggressively in targeted international markets.
And while bolstering its content slate is a priority, the chief executive signaled the company will be more strategic and selective about output, with a pivot in focus to quality rather than volume.
Asked by equity analysts on the call about confidence in the ability of the Marvel franchise to still be a main driver of the Disney flywheel given a renewed focus on theatrical output over scripted franchise series on Disney+, Iger acknowledged some earlier missteps. The CEO admitted Disney previously went too hard to pump out content to fill its streaming platforms – including with the superhero-fueled Marvel franchise – which didn’t always equate to quality or hits.
“We all know that in our zeal to flood our streaming platform with more content, that we turn to all of our creative engines, including Marvel, and have them produce a lot more. We've also learned over time that quantity does not necessarily beget quality, and frankly, we've all admitted to ourselves that we lost a little focus by making too much,” Iger said.
By consolidating and having Marvel narrow focus more squarely on films “we believe it will result in better quality,” he said.
Iger’s more confident in the upcoming and current slate – including Disney’s latest theatrical release Thunderbolts from Marvel Studios, which opened last weekend and according to the CEO, “is currently the number one movie in the world and the best reviewed Marvel film in the last few years.”
As for quarterly results, Disney’s direct-to-consumer segment generated $6.1 billion in revenue for the period ending March 29, up 8% yoy. Operating income for the DTC businesses (which includes Disney, Hulu and ESPN+) surged to $336 million, up from just $47 million in the same quarter a year ago. It continues DTC profitability momentum Disney also saw in the two previous quarters. Disney attributed the improvement to growth in subscription revenue on the back of price increases and more subscribers as well as higher ad revenue thanks to more impressions, but partially offset by lower CPM rates.
Disney DTC subscribers
Disney+ gained a total of 1.4 million subscribers in the latest quarter, bringing its global total to 126 million. That includes adding 1 million Disney+ subs in the US and Canada, for a domestic base of 57.8 million. The Hulu SVOD, meanwhile, gained 1.3 million subscribers for a total of 50.3 million, but virtual MVPD Hulu + Live TV lost 200,00 subscribers for a streaming pay TV count of 4.4 million. ESPN+ also lost subscribers, decreasing by 800,00 for a base of 24.1 million as of the end of March.
Hulu-Disney+ integration is having positive impact
Disney last year integrated the Hulu and Disney+ user experience for bundled subscribers – making Hulu and its content accessible without having to leave the Disney+ app.
On Wednesday, Iger said the presence of Hulu embedded in Disney on the user experience side, as well as the addition of sports, content “is definitely having a positive impact.”
“Not only is engagement up, but churn is down, and significantly,” he commented.
On the advertising front, execs categorized the ad market as “quite healthy” for Disney, with live sports in particular doing very well and advertisers in restaurants and healthcare verticals as showing particularly robust demand. Still, Disney noted advertising was a bit more challenged in the DTC business – but contended it’s not driven by lack of demand but rather increased supply with new entrants in the marketplace.
ESPN DTC flagship name coming soon
Disney didn’t provide an update on launch date or pricing for its forthcoming ESPN DTC flagship service but intends to reveal the name of the service and pricing strategy next week coinciding with Upfronts, according to Iger.
He did say linear subscribers of ESPN through pay TV providers will automatically get access to the flagship ESPN DTC service. The company aims to be somewhat agnostic from a subscriber perspective, Iger noted, “so that we can still do our best preserve the multichannel ecosystem” but at the same time wants to grow DTC.
The main difference between the linear pay TV ESPN network and the flagship streaming app, according to Iger, is that consumers who opt for the linear channel “will not have the bells and whistles” and additional user features that will be available on the ESPN streaming app.
Disney does plan to keep giving Disney+ and Hulu subscribers a taste of live sports on that SVOD service as well – providing a way to upsell them on the ESPN DTC service. And for those that subscribe to all three – Hulu, Disney+ and ESPN flagship – it intends to provide a seamless and integrated experience across services.
“They'll be completely, ultimately integrated or embedded into the service… that I think is a real plus from a consumer experience perspective,” Iger said.
Earnings results
In addition to DTC, growth in content sales and licensing helped boost Disney’s Entertainment segment revenue, which also includes linear networks, and totaled $10.68 billion in the period, up 9% yoy. Content sales and licensing contributed $2.1 billion in revenue, up 54% yoy, while linear networks revenue declined 13% yoy to $2.4 billion.
Disney breaks out ESPN within a separate Sports segment, where revenue was up 5% yoy to $4.5 billion. Sports segment operating income declined 12% yoy to $687 million – with Disney citing adverse impacts from write-offs due to ending the Venu Sports joint venture.
Disney’s Experience segment, which includes theme parks drove $8.9 billion in revenue for the quarter, up 6% yoy. Disney also announced an agreement with Miral to create a new Disney theme park resort location in Abu Dhabi, United Arab Emirates.
Disney’s total quarterly revenues were $23.6 billion, up 7% yoy, while total operating income rose 15% over the prior year quarter to $4.4 billion