Disney (DIS) CEO Bob Iger said the media giant plans to reduce its investments in linear television “quite dramatically” as the company works to turn its streaming unit into a consistently profitable division.
Last summer, Iger said he would take a “comprehensive” look at the entertainment giant’s traditional TV assets, signaling the potential for strategic options including a sale.
That ultimately didn’t materialize when Iger said Wednesday that the company had determined in its analysis that linear “is not going to be a growth business, but it could become an important part of our ability to interact with consumers.”
Iger said Dana Walden, who oversees Disney’s television studios, and Jimmy Pitaro, who runs ESPN, are tasked with reducing traditional network investments while “seamlessly” managing the streaming business.
“You have the same executives running both, and their goal is to drive earnings growth,” he said while speaking at a MoffettNathanson investor conference.
An example of this duality is the “fairly quick” posting of episodes of “Grey’s Anatomy” and “Abbott Elementary,” which air on ABC, to the Hulu platform — or in some cases at the same time.
The audience, Iger said, is different because ABC is “older” than Hulu. “We’re actually gathering a larger audience and we’re amortizing the costs,” he added.
While the executive said he still expects erosion when it comes to linear TV subscribers, the segment “will continue to drive profitability as we manage our costs so effectively.”
Overall, “We feel comfortable right now because we are using those networks efficiently and effectively.”
Linear networks have been a sore point for traditional media giants across the board as a bleak advertising environment eats into revenues, coupled with the mass exodus of pay-TV consumers.
Before the cord-cutting phenomenon, linear advertising and cable affiliate fees had consistently increased revenues. But as ad buyers flee traditional TV channels in favor of digital options like streaming, companies are starting to realize they may never achieve the same returns.
Domestic operating income at ESPN fell 9% year over year to $780 million, driven by lower affiliate revenue and fewer subscribers as more consumers cut the cord. Disney enjoyed its fiscal second quarter earnings results.
It was a similar story for domestic linear network revenue within the entertainment division, which fell 11% year-over-year in the quarter. Operating profit within the segment fell by 18%. This was also due to lower affiliate revenue, along with a drop in advertising revenue.
Streaming, on the other hand, turned around the direct-to-consumer (DTC) portion of its entertainment segment, which includes Disney+ and Hulu, posting an operating income of $47 million, compared to a loss of $587 million in previous years. year period.
Still, all of show business is tough these days, and the company warned that it expects some DTC results in the entertainment segment to come in the red in the third quarter. But Disney expects full streaming profitability in the fourth quarter of this year.
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
