Disney (DIS) CEO Bob Iger says the company plans to invest “pretty significantly” in linear TV as the company works to make its streaming division a consistently profitable unit. He said he plans to reduce it.
Last summer, Mr. Iger said he would take an “extensive” look at the entertainment giant’s legacy television assets, hinting at possible strategic options including a sale.
That ultimately didn’t happen, and Iger said Wednesday that the company’s analysis determined that Linear “is not going to be a growth business, but it could be an important element of our ability to engage with consumers.” He said he did.
Iger said Dana Walden, who oversees Disney’s television studios, and Jimmy Pitaro, who heads ESPN, were tasked with reducing investment in traditional networks while managing the streaming business “seamlessly.” It is said that there is.
“The same executives are managing both, and their goal is to drive revenue growth,” he said at the Moffett-Nathanson Investor Conference.
One example of this duality is bringing episodes of “Grey’s Anatomy” and “Abbott Elementary” that air on ABC to the Hulu platform “fairly early,” sometimes at the same time.
Iger said ABC has an “older” audience than Hulu. “We’re basically attracting a larger audience and amortizing our costs,” he added.
The executive said while a decline is still expected in linear TV subscriber numbers, “we are managing costs very effectively, so the segment will continue to drive profitability.” .
Overall, “we’re using these networks efficiently and effectively, so we feel comfortable so far.”
Linear networks have become a general thorn in the side of traditional media giants, as a mass exodus of pay-TV consumers and a disastrous advertising environment weigh on profits.
Before the cord-cutting phenomenon, linear advertising and cable affiliate fees consistently drove revenue. But as ad buyers increasingly choose digital options such as streaming from traditional TV channels, companies are realizing they may not be able to reap the same level of profit.
ESPN’s domestic operating income fell 9% year over year to $780 million. This was dragged down by a drop in affiliate revenue and a drop in subscribers as more consumers cut the cord, leading to Disney’s elated second-quarter results.
The same was true for domestic linear network revenue in the entertainment division, where revenue for the quarter was down 11% year over year. The segment’s operating profit decreased by 18%. This is due to a decline in advertising revenue as well as affiliate revenue.
Meanwhile, the streaming division saw a turning point in the direct-to-consumer (DTC) portion of the entertainment division, which includes Disney+ and Hulu, with operating income of $47 million (compared to a $587 million loss in the previous year). period of years.
Still, the current situation in show business is tough, and the company warned that it expects DTC results for some of its entertainment divisions to be in the red in the third quarter. However, Disney expects to be fully profitable from streaming by the fourth quarter of this year.
alexandra canal I’m a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, Email alexandra.canal@yahoofinance.com.
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