The coronavirus pandemic had an especially harmful effect on The Walt Disney Company (DIS 1.09%). A big part of its annual revenue depends on bringing people together in person. Think of theme parks, hotel resorts, cruise ships, and big-screen theaters that all had to shut down at the onset of the pandemic.  

Disney's streaming services, however, were a bright spot, adding over 100 million subscribers in a little over a year, but the segment is not yet profitable. That left Disney's linear TV segment to carry the company through 2020. 

A person cutting a cord from his TV.

Image source: Getty Images.

Carrying the load

Disney's media segment, which includes its live TV business, earned $9 billion in operating income in 2020. Meanwhile, the rest of the company altogether lost money. The trend is continuing thus far in 2021.

The company restructured the business, and the live TV business is now included in the linear networks segment, which has earned $4.6 billion in operating income in 2021 while the rest of the company has lost money. Much has been said about cord-cutting and the millions of folks who are switching to streaming services instead. But Disney's results show that its TV business is still strong.

Admittedly, revenue is declining along with viewership. Still, Disney is making up for it by charging higher affiliate fees, which cable and satellite providers pay to carry Disney's network channels like ESPN. 

Advertising is picking up 

The onset of the pandemic caused advertisers to pause spending. The outcome was uncertain, and businesses wanted to conserve cash wherever they could. Now, as economies are reopening worldwide, businesses want to get the word out that they are open. 

According to estimates, advertisers will spend $19.9 billion upfront in the 2021 to 2022 TV season, an increase of 7.6% from the previous year, and nearly reach the peak levels in the 2018 to 2019 season.

In addition to getting the word out, advertisers anticipate a rebound in sports viewership that cratered during the acute phase of the pandemic when teams were playing altered seasons with no fans allowed in arenas. The recently concluded National Basketball Association playoffs garnered 35% more viewers than last year. That was good news for Disney, since many of the games were aired on its ESPN and ABC networks.

What this could mean for investors 

Admittedly, over the next several years, more and more folks will cancel their cable and satellite packages and switch to streaming their content. There are too many conveniences in favor of streaming versus cable or satellite, including the ability to watch your programs across all your electronic devices, not just your television. Fortunately for Disney shareholders, management acknowledges this reality. 

The company has launched three streaming services, Disney+, Hulu, and ESPN+, which combine for over 150 million subscribers. The House of Mouse has laid the groundwork to transition fans of their programming toward its streaming services. In fact, folks can purchase a package, Hulu Live TV, that is very similar to a traditional cable subscription.

In the meantime, Disney will do its best to extract as much profit as it can from linear network subscribers. Investors can take comfort in that it's not the demand for Disney's programming that is falling off. It's just that folks have changed their preference for how they want to consume that programming.