Disney stock surged over 7% Thursday after the media company delivered a strong fiscal fourth quarter, during which it reported a $321 million in operating income on direct-to-consumer streaming.
That figure compared to a $387 million loss for the same segment in the July-September period of 2023 and a $47 million operating income last quarter for the segment, which includes Disney+, Hulu and ESPN+.
Disney+ launched almost exactly five years ago on November 1, 2019. The profit represents quite a turnaround since as recently as Disney's fiscal 2022, the company reported an annual loss of $4 billion on streaming.
Disney’s overall revenue surged 6% to $22.6 billion for the quarter, beating analysts’ consensus expectations of $22.45 billion.
Disney+ Core subscribers — a grouping that doesn’t include Hotstar customers in the Indian subcontinent region — grew by 4.4 million in the quarter to 122.7 million. Hulu added 900,000 total subscribers to reach 52 million paid users.
Notably, with the return of college and pro football occurring in late-August/early-September, virtual MVPD Hulu + Live TV added 200,000 subscribers.
Disney said that 60% of its new Disney+ subscribers are taking the service’s cheaper, partially ad-supported tier and that 37% of its overall U.S. user base is now watching commercials on the platform.
Disney raised Disney+ prices across tiers in October, with the ad-supported version going up by $2 a month to $9.99. The Premium no-ads tier also shot up by $2 to $15.99 a month.
“The pricing that we recently put into place, which is increased pricing, was actually designed to move more people to the AVOD direction,” Disney CEO Bob Iger told equity analysts during Thursday morning’s earnings call.
Disney CFO Hugh Johnston seemed to hint that more price increases could be coming in the near future.
“We certainly look to continue to increase pricing in line with the value that we’re providing to consumers,” Johnston said. “A lot of the growth that we’re seeing right now is because of the exceptional content that’s coming out of both the movie and the TV studios that are that’s obviously our proprietary content, so that’ll certainly enable us to increase pricing over time.”
With subscriber growth surging for Disney+ Basic (With Ads), advertising revenue for Disney streaming increased by 14% in fiscal Q4. And that helped drive up Disney’s overall entertainment segment, also by 14%, to $10.83 billion in sales. (Disney’s entertainment segment also includes TV networks and the motion picture division.)
Unlike Hollywood rivals including Paramount Global, which saw traditional businesses drag down solid quarterly streaming performances, Disney was aided by traditional pipelines.
Specifically, the summer motion picture theatrical release of Inside Out 2 generated almost $1.7 billion at the global box office, making it the most successful animated feature ever.
But like every other major media conglomerate, Disney was dragged down in fiscal Q4 by the segment that used to be its growth engine — linear TV networks. Revenue from these networks declined 6% in the quarter to $2.46 billion, with profit dropping 38% to $498 million.
Profits from ESPN fell another 6%, with pay TV cord-cutting continuing to cut into revenue, and the network having to pay ever more to license live content from sports leagues.
(You can experience all of Disney’s fiscal Q4 download here.)