Disney shifts content spending to streaming, reduces investment in linear TV: Reports

Anticipating a shrinking traditional pay-TV market, Disney CEO Bob Iger has announced a strategic shift in content spending. According to Variety report, the company will decrease investments in programming for linear TV networks. This cost reduction will be offset by spreading content spending across their expanding streaming services.

The strategy is “to reduce pretty dramatically our investment in content specifically aimed at those traditional networks,” Iger was quoted by Variety.

According to Iger, while the TV business is not on a growth trajectory it still has the potential to become an important component to engage with customers.

Reports also suggest that Disney will invest in some traditional TV areas. “For instance, when ABC airs a new episode of Grey’s Anatomy or Abbott Elementary it goes on Hulu pretty quickly and what we’re getting is unduplicated audiences. We’re basically aggregating greater audiences and we’re amortising costs,” Iger was quoted by Variety. said.

Iger also said that whole erosion will continue to happen in some subsidiaries and the company will continue to push profitability on the back of effective cost management.

Earlier this month, The Walt Disney Company reported their earnings for its second quarter ended March 30, 2024. Revenues for the quarter increased to $22.1 billion from $21.8 billion in the prior-year quarter.

“In the second fiscal quarter of 2024, we achieved strong double digit percentage growth in adjusted EPS, and met or exceeded our financial guidance for the quarter. As a result of outperformance in the second quarter, our new full year adjusted EPS growth target is now 25 percent. We remain on track to generate approximately $14 billion of cash provided by operations and over $8 billion of free cash flow this fiscal year,” said a press statement released by the company on May 7.

The company also repurchased $1 billion worth of shares in the second quarter and looks forward to continuing to return capital to shareholders.

The Entertainment Direct-to-Consumer business was profitable in the second quarter.

“While we are expecting softer Entertainment DTC results in Q3 to be driven by Disney+ Hotstar, we continue to expect our combined streaming businesses to be profitable in the fourth quarter, and to be a meaningful future growth driver for the company, with further improvements in profitability in fiscal 2025,” the statement added.

Disney+ Core subscribers increased by more than 6 million in the second quarter, and Disney+ Core ARPU increased sequentially by 44 cents.

Sports operating income declined slightly versus the prior year, reflecting the timing impact of College Football Playoff games at ESPN, offset by improved results at Star India.

The Experiences business was also a growth driver in the second quarter, with revenue growth of 10 percent, segment operating income growth of 12 percent, and margin expansion of 60 basis points versus the prior year.

“Our strong performance in Q2, with adjusted EPS up 30 percent compared to the prior year, demonstrates we are delivering on our strategic priorities and building for the future,” Iger had said in the earnings call.