Iconic entertainment brand Disney (DIS +2.18%) had some exciting news for investors this week. The company reported earnings for the fiscal 2025 third quarter (ended June 28) and they were mediocre. But it was the company updates that stole the show, and it looks like Disney is getting into a better position in streaming. Let's see what's happening.
No other experience like it
Disney is an entertainment giant with many exclusive assets that serve as a strong moat. Although there are other theme parks in the world, there's nothing quite like the magic of the Disney experience, which brings together loved franchises and characters that fans feel connected to.
Image source: Disney.
All of Disney's segments work together, with the content and characters unifying all the parts. But Disney's theme parks are a complete business. They were a standout in the third quarter, driving total revenue growth of 2% year over year with an 8% increase, and driving overall profitability and an earnings beat with a 22% increase in operating income.
That was important over the past few months, since streaming is still finding its footing and linear networks are still in decline. Disney+ added 1.8 million new subscribers in the quarter, only 1% more than last year, and streaming operating income increased about 5%.
However, CEO Bob Iger provided some massive news about streaming that could positively change Disney's trajectory.
ESPN, NFL, and Hulu
There were two major announcements related to streaming that Iger gave on the earnings call. One was the integration of Hulu into Disney+, with both available through a single app. This offers greater selection and personalization options for viewers, as well as more engagement, lower churn, higher margins, and improved advertising opportunities for Disney. It puts the two channels together on one tech platform, which is easier and cheaper to run, and creates the potential for advertising packages that weren't available in the previous format. Down the line, Iger expects this to result in greater price elasticity and bundling opportunities.
NYSE: DIS
Key Data Points
The second streaming update caught a lot more attention in the market, and that's the launch of the new ESPN+ on Aug. 21 along with a new partnership between ESPN and the National Football League (NFL). The ESPN+ streaming platform has been a work in progress for several years as Disney has tried tried to figure out what to do with it. It's an important element of the company's cable networks strategy, but it also needs to offer something unique to streaming viewers. The new ESPN streaming site will offer personalized features, game stats, fantasy sports, and other special elements not available on the cable network. Subscribers to the full Disney+, Hulu, and ESPN bundle will be able to view content directly on the Disney+ app, further unifying the platform.
As part of its new streaming era, ESPN is acquiring the NFL network and some media assets, including highlight reels on social media sites and interactive platforms. It will also offer the NFL's Red Zone channel to premium subscribers. The NFL is taking a 10% stake in ESPN in return. This could have broader implications in the world of sports, impacting player salaries and the relationship with the players' union, and it will have to meet regulatory approval. But it's a big win for Disney as it carves out ESPN's place in the streaming world.
Is Disney winning the streaming wars?
I wouldn't say this means Disney is winning the streaming wars. Disney's streaming business is still trying to keep up with Netflix, which has truly demonstrated spectacular performance in the face of an onslaught of new streaming companies over the past few years. It still has more subscriptions than Disney, although it stopped reporting subscription numbers at the end of 2024, and it has more revenue than Disney's streaming business. It's also growing faster and has a wide operating margin of 31.5%. Disney has an unparalleled content library, but streaming only recently became profitable and it's still figuring out how to make the business work best.
The new updates are exciting for Disney shareholders, and Disney's streaming business is well positioned to keep growing and create value for the company.
