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Does Disney Still Have A DTC Streaming Ace Up Its Sleeve That Could Dominate The Market?

Media giant Walt Disney Co DIS beat estimates for the second quarter with growth coming for its Parks and Resorts segment and also its direct-to-consumers business, led by streaming growth.

Could the company have another ace up its sleeve for future growth?

What Happened: Disney reported revenue of $19.3 billion in the second quarter, beating a Street consensus estimate of $18.9 billion. One of the highlights in the quarter was growth of the company’s Media and Entertainment segment, which had revenue of $13.6 billion, up 9% year-over-year.

The company’s linear networks had revenue of $7.1 billion, up 5% year-over-year, and also saw a decline in operating income. The segment that saw the strongest growth for media was the company’s direct-to-consumer segment, which had revenue of $4.9 billion, up 23% year-over-year.

For the second quarter, Disney had 44.4 million domestic Disney+ subscribers and 137.7 million total Disney+ subscribers.

Other streaming platforms ESPN+ and Hulu ended the quarter with 22.3 million and 45.6 million subscribers respectively.

Related Link: 7 Walt Disney Analysts React To Q2 Earnings Miss, Subscriber Beat, Ongoing Asia Weakness

Future Streaming Growth: Disney has been able to use its vast content library that includes the Pixar, Marvel and Star Wars brands to help boost its Disney+ streaming platform with library titles and new original series and movies.

While the company’s ESPN+ unit has grown and is also part of a bundle option that gives viewers Disney+, Hulu and ESPN+ for one low price, it could have the best growth potential down the road.

Disney CEO Bob Chapek shared an update on the potential to launch an ESPN streaming package in the future that would offer ESPN+ and also streaming of all content, including live sporting events seen on the ESPN channel. 

Chapek called a potential platform “the ultimate fan offering that will appeal to the superfan who loves sports.” Chapek also said that ESPN could be the only sports network to pull it off.

Former Disney CEO Bob Iger said back in 2015 that Disney would launch a streaming platform for ESPN “eventually” and said the move could be more than five years out.

Now seven years later, Disney investors and sports fans are eager to hear more on a timeline of a potential move.

Chapek wouldn’t share when a move will happen, but reassured that it is coming in the future. Concerns over profitability for a hypothetical streaming platform and the impact it could have on existing sports league deals are potential roadblocks.

“At the same time, we’re very conscious of our ability to go more aggressively into the DTC area of ESPN, so what we’re doing is sort of putting one foot on the dock, if you will, and one foot on the boat right now.”

The discussion of the potential sports streaming powerhouse came from an analyst asking Chapek what was holding the company back for a full a-la-carte sports network.

“But what we know is at some point when it’s going to be good for our shareholders, we’ll be able to fully go into an ESPN DTC offering, the way that you describe, and we fully believe that there is a business model there for us that’s going to enable us to regain growth on ESPN Plus in a full DTC expression,” Chapek said.

ESPN+ subscribers were up 62% year-over-year in the second quarter.

Benzinga’s Take: The ESPN name and brand remains one of the biggest in the sports market. While many have cut the cord and rely only on streaming options and no longer watch cable television, live sports content has shown that it remains valuable.

A platform that could offer ESPN content as a streaming option could be incredibly valuable to Disney’s future growth and could also be a strong package and cross-selling opportunity for the company.

DIS Price Action: Disney shares are down 0.92% to $104.31 on Thursday at market close.

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