Disney Direct-to-Consumer Losses Mount in Q1

Deeper investments in ESPN+ and costs tied to the coming Disney+ OTT service attributed to a widening Q1 operating loss of $393 million at Disney's international and direct-to-consumer unit.

Jeff Baumgartner, Senior Editor

May 9, 2019

3 Min Read
Disney Direct-to-Consumer Losses Mount in Q1

Shedding more light on the size of the bet The Walt Disney Company is placing on OTT distribution, the media giant said operating losses at its direct-to-consumer and international unit clocked in at $393 million in the first quarter, more than double last year's loss of $188 million.

Disney attributed the wider operating loss to ongoing investment in ESPN+, a sports-oriented OTT subscription service that launched last April, and the costs tied to the upcoming launch of Disney+. Disney plans to launch Disney+ on November 12 at a price of $6.99 per month.

Disney, of course, has the financial heft to absorb those losses -- total Q1 revenues rose 3% to $14.92 billion, with $5.52 billion generated by Disney's media networks unit. Revenues at Disney's DTC/international division rose 15%, to $955 million.

Speaking on the Q1 call Wednesday, Disney chairman and CEO Bob Iger said the company is "extremely pleased" with the reaction to Disney's investor day on April 11, when the company demonstrated and revealed more details about the Disney+ service.

It won't take long for Disney+ subscribers to benefit from Disney's theatrical mix. Iger said Avengers: Endgame, the superhero flick that has already raked in more than $2.3 billion at the box office, will become available on Disney+ on December 11, about a month after the service is launched.

Disney+ has global ambitions, but getting the service into China will be as much a challenge for The Mouse as it is for others that operate streaming services.

"Right now, there are regulations in China that might limit what we can do from an OTT perspective," Iger said. "If we're going to launch something [in China], it would have to be with a local partner and shared ownership."

He said Disney will have to "work our way through that … We certainly believe there are opportunities."

On the call, Iger also confirmed recent reports that Disney and Comcast have talked about Comcast possibly divesting its 30% stake in Hulu, but didn't say if or when such an agreement might be consummated.

Disney snared a controlling stake in Hulu following its acquisition of 21st Century Fox, and stands to expand its ownership of the OTT-delivered subscription VoD and live TV service now that AT&T/WarnerMedia is selling off its 9.5% piece of the Hulu joint venture for $1.43 billion. Hulu has 28.6 million subscribers -- a number that includes those taking its standalone SVoD offering and/or its live TV service.

One concern is that Hulu's VoD library could shrink if Comcast/NBCU sold its stake and pulled back content for NBCU's coming OTT offering. Iger did not appear to be overly concerned about such a result.

Should Comcast divest its stake in Hulu, "there probably would be some ongoing relationship" related to NBCU programming, he said.

Related posts:

— Jeff Baumgartner, Senior Editor, Light Reading

Read more about:


About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like