Disney Just Had Its Worst Day In A Year And A Half

Disney accomplished a rare achievement for a traditional media company: its streaming service generated a profit — with some limitations. But Wall Street was still dissatisfied, sending stocks down more than 9%. Disney had its worst stock trading day in 18 months.

Disney (DIS), fresh off a bruising (and ridiculously expensive) boardroom proxy battle last month, made $47 million in profit from Disney+ and Hulu for the first time ever. However, Disney’s other streaming product, ESPN+, continued to lose customers and dollars, bringing the total streaming loss to $18 million.

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Disney Just Had Its Worst Day In A Year And A Half

That’s a lot of money, but it’s a significant improvement over the $659 million deficit the collective streaming business suffered in the same period last year.

Wall Street is always looking ahead to future growth, so the expected decline next quarter sent investors into a frenzy.

“They delivered some pretty good results,” said Paul Verna, eMarketer’s main analyst. “What the Street seems to be reacting to is the guidance for some softness in entertainment streaming next quarter.”

Disney expects the merged streaming operation to be profitable by the end of its fiscal year in September.

Of course, “getting to profitability is one thing,” Verna explained. “Sustaining it is another.”

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Disney Just Had Its Worst Day In A Year And A Half

Disney is amid an unpleasant transformation nobody could have predicted a decade ago. Imagine telling CEO Bob Iger in 2014 that one day his firm, a die-hard movie-making, intellectual-property-mastering Hollywood giant, would be competing with software nerds like Apple and Amazon, hoping to catch up with that little DVD distribution provider, Netflix.

But that’s basically what’s going on.

Streaming is a new(ish) and very different beast from the old cable TV model that Disney and other media conglomerates like Paramount, Viacom, and Warner Bros. Discovery (CNN’s parent company) have relied on for decades to boost profit margins.

However, years of cord-cutting mean that cable’s gravy train is ending, and firms like Disney must figure out how to continue producing fantastic TV and movies while simultaneously capturing streaming consumers before Netflix eats their lunch.

“It is a very tough business,” Verna added. “Profit margins are lower…” Maybe it’s psychological, but it’s almost as if these corporations that have built entire businesses around the cable model find it difficult to let go and accept that their future will look different.”

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Disney Just Had Its Worst Day In A Year And A Half

Streaming is only one of several headaches for Disney. It has had a string of box-office disappointments (“The Marvels,” “Indiana Jones and the Dial of Destiny,” “Haunted Mansion”). Iger has been attempting to carry out an ambitious turnaround strategy, resulting in thousands of layoffs and the costly merging of its India divisions while battling off activist investors in a shareholder drama worthy of an eight-episode television series. And in the midst of it all, Iger, 73, is reportedly lining up a successor to take over when his contract expires in two years.

Tuesday’s market reaction demonstrates that Wall Street has “more questions than answers for earnings over the next couple of quarters,” according to Brian Mulberry, a portfolio manager at Zacks Investment Management. “While it is a relief, I am sure, to have the battle over board seats behind them, it now creates more focus on results.

SOURCE – (AP)