Disney Posts Strong Quarterly Earnings Despite $110M YouTube TV Carriage Dispute
Disney delivered impressive financial results for its fiscal first quarter, despite facing a significant $110 million setback from a recent carriage dispute with YouTube TV. The quarter ended on December 27, reporting a revenue increase of 5% year-over-year, totaling $25.98 billion. Diluted earnings per share reached $1.63, excluding non-recurring items, surpassing Wall Street’s expectations of $25.6 billion in revenue and $1.58 in earnings.
Quarterly Earnings Overview
The financial results were released just before the stock market opened on Monday, a rare timing for media companies. Investors are closely monitoring the ongoing discussion regarding CEO Bob Iger’s successor, with the Disney board expected to announce its decision during its quarterly meeting this week. Current frontrunner for the position is Josh D’Amaro, chairman of Disney’s Experiences division.
Challenges in the Sports Division
The Sports division reported an operating income of $191 million, reflecting a 23% decline compared to the previous year. This decrease was attributed to escalating programming and production costs, coupled with a drop in subscription and affiliate fees, which were not fully offset by a 10% rise in advertising revenue. The carriage dispute with YouTube TV, where major networks like ESPN and ABC faced a 15-day blackout in mid-November, significantly impacted the division’s earnings.
Growth in the Experiences Division
- Revenue from Experiences, which encompasses theme parks, resorts, and cruise ships, reached $10 billion—a record high.
- Operating income from this segment stood at $3.3 billion.
- Domestic park attendance rose by 1%, with a 4% increase in per capita spending.
However, Disney anticipates that income growth for Experiences will be only “modest” in the coming quarter due to challenges faced from international visitation declines, partially influenced by tariffs introduced during President Trump’s administration.
Entertainment Revenue Insights
Disney’s entertainment division achieved a 7% revenue increase, totaling $11.6 billion. Despite the revenue growth, operating income fell by 35% due to higher costs associated with increased theatrical releases. Notable films released this quarter included Zootopia 2, Avatar: Fire and Ash, Predator: Badlands, and Tron: Ares, which replaced last year’s two releases.
- Significant box office performances from Zootopia 2 and Avatar: Fire and Ash are expected to positively impact future quarters.
Additionally, the operating income from streaming services, driven by Disney+ and Hulu, soared to $450 million, exceeding internal goals. Management forecasts this figure could rise to $500 million in the current quarter. Recent price increases have bolstered streaming revenue, although Disney has stopped reporting subscriber numbers and average revenue per user, following the trend established by Netflix.
CEO Transition and Future Outlook
Bob Iger noted in the earnings report his commitment to steering Disney towards a successful future. His current tenure as CEO, which began in November 2022, follows a previous term that lasted from 2005 to 2020. Iger expressed pride in the company’s accomplishments over the last three years.
