Walt Disney’s Q3 revenue up by 4%; revenue from linear networks down 7%

Walt Disney has reported a revenue increase of 4% at $ 22.3 billion for the third quarter ended July 1, 2023, up from $ 21.5 billion in the corresponding quarter last year.

The company’s Q3 diluted earnings per share (EPS) from continuing operations was at a loss of $ 0.25 compared to income of $0.77 in the prior-year quarter.

The company reported that the revenue from linear networks came down by 7% to $6.7 billion from $7.1 billion in the last fiscal and the operating income decreased by 23% to $1.9 billion.

However, revenue from Direct-to-Consumer Content Sales/Licensing and Other went up by 9% to $5.5 billion from $5 billion.

Disney+ Hotstar paid subscribers in Q3 ended July 1, 2023 stood at 40.4 million, down from 58.4 million in the corresponding quarter last year. The average monthly revenue per paid subscriber for Disney+ Hotstar stood at $0.59 in Q3 2023 while it was $1.20 in the same quarter last fiscal.

Domestic Channels revenues for the quarter decreased by 4% to $5.5 billion, and operating income decreased by 14% to $1.8 billion. The decrease in operating income was due to lower results at both Broadcasting and Cable, the company said.

International Channels revenues for the quarter decreased by 20% to $1.2 billion, and operating income decreased to a loss of $87 million from income of $166 million.

“The decrease in operating results was primarily due to lower advertising revenue and, to a lesser extent, an unfavorable foreign exchange impact. The decrease in advertising revenue was due to lower rates attributable to Indian Premier League (IPL) cricket programming,” the company said.

During the investors’ call, Bob Iger, Chief Executive Officer, The Walt Disney Company, said, “Our results this quarter are reflective of what we’ve accomplished through the unprecedented transformation we’re undertaking at Disney to restructure the company, improve efficiencies, and restore creativity to the center of our business.”

He said, “In the eight months since my return, these important changes are creating a more cost-effective, coordinated, and streamlined approach to our operations that has put us on track to exceed our initial goal of $5.5 billion in savings as well as improved our direct-to-consumer operating income by roughly $1 billion in just three quarters. While there is still more to do, I’m incredibly confident in Disney’s long-term trajectory because of the work we’ve done, the team we now have in place, and because of Disney’s core foundation of creative excellence and popular brands and franchises.”

In segment revenues, Disney Media and Entertainment Distribution came down by 1 % from $14,110 million to $ 14,004 million in the third quarter while Disney Parks, Experiences and Products saw an increase of 13% from $7,394 million in the last fiscal to $8.326 million in the current fiscal’s Q3.

Iger said that three businesses of Disney which will drive the greatest growth in value creation over the next five years are its film studios, parks businesses and streaming.

He said that Walt Disney World is still performing well above pre-COVID levels with 21% higher revenue and 29% higher operating income compared to fiscal 2019.

He announced that 3.3 million subscribers have signed up to the ad-supported Disney+ option at the end of Q3.

He also said that soon details regarding the upcoming streaming price increases will be announced.

Disney is also exploring ways to address account sharing and the best options for paying subscribers to share their accounts with friends and families.

“Later this year, we will begin to update our subscriber agreement with additional terms on our sharing policies. And we will roll out tactics to drive monetization some time in 2024,” Iger said.

The company said that ratings continue to increase on the ESPN main linear channel, even as cord-cutting has accelerated.

Talking about the announcement that ESPN has entered into an exclusive licensing arrangement with Penn Entertainment to further expand the ESPN brand into the growing sports marketplace, Iger said that this licensing deal will offer a compelling new experience for sports fans that will enhance consumer engagement.

“We're excited to offer this to the many fans who have long been asking for it. Overall, we're considering potential strategic partnerships for ESPN looking at distribution, technology, marketing, and content opportunities where we retain control of ESPN. We receive notable interest from many different entities and we look forward to sharing more details at a later date when we are further along in this,” he said.

“In closing, I returned to Disney in November, and I have agreed to stay on longer because there's more to accomplish before our transformation is complete. And because I want to ensure a successful transition from my successor….

“I'm overwhelmingly bullish about the Disney future in the beginning of the call. The work we have done over the 8 months is the core foundation of excellence and franchises and because of the unrivalled talent we have at every level here at Disney,” he said.

Disney+ core subscribers grew by nearly 8 lakhs during the third quarter and its core ARPU increased by $0.11, driven by higher per-subscriber advertising revenue domestically and as well as price increases in certain international markets.  

“Disney+ Hotstar subscribers declined this quarter as we adjusted our product from one centred around the IPL to one more balanced with other sports and entertainment offerings. I would also note that this business with its significantly lower ARPU compared to core Disney+ is not a material component of our overall B2C financial results,” said Kevin Lansberry, Interim Chief Financial Officer of Walt Disney.