In this article, Disney appears to be challenging the views of Warren Buffett, known as “The Oracle of Omaha,” who expressed skepticism about the streaming video business last year. Buffett stated that streaming was not a strong business and shareholders had not seen significant returns over time. This sentiment was reflected in the underperformance of legacy media companies like Comcast’s NBCUniversal, Disney, Paramount Global, and Warner Bros. Discovery compared to the S&P 500 since the beginning of 2022, largely due to losses incurred in launching subscription streaming services.
However, Disney’s recent quarterly earnings report suggests that streaming is poised to become a more lucrative business. By reducing content spending and steadily growing its subscriber base for Disney+, Hulu, and ESPN+, Disney has transformed streaming into a profitable venture. According to Disney’s Chief Financial Officer Hugh Johnston, streaming has now become a more lucrative business than traditional TV.
Johnston mentioned that for Disney’s fiscal 2025, the operating income from streaming is expected to offset the decline in operating income from linear TV. Disney anticipates a significant increase in entertainment direct-to-consumer operating income for the upcoming fiscal year, potentially exceeding $1 billion. The company is prepared for consumer preferences to shift between linear TV and streaming.
Disney’s earnings reflect this positive trend, with its streaming platforms showing improved profitability in the fiscal fourth quarter. The combined operating income from Disney’s entertainment streaming services reached $321 million, with Disney+ and Hulu contributing $143 million in operating income for the year, a significant improvement from the previous year’s losses.
Investors have been cautious about the future of traditional media, believing that subscription streaming services may not match the profits generated by linear TV. The shift to streaming has disrupted the traditional pay-TV model, leading to increased cancellations of cable subscriptions. However, Disney’s outlook suggests that streaming could eventually replace cable TV as companies adapt to changing consumer preferences and explore bundling options to retain subscribers.
Disney’s positive results align with Warner Bros. Discovery’s successful streaming performance, indicating a potential turnaround for the media industry. Warner Bros. Discovery’s direct-to-consumer division reported a profit of $289 million, driven by a rise in global subscribers and advertising revenue. The addition of 7.2 million global customers to its flagship streaming service, Max, further demonstrates the growing popularity of streaming platforms.
Overall, the media industry may emerge stronger than anticipated, with Disney’s stock price rising by 6.2% following the positive earnings report. It is worth noting that Comcast’s NBCUniversal is the parent company of CNBC.
