Walt Disney Co.’s disappointing results on Wednesday revealed ongoing issues with its streaming business, providing further evidence of how the streaming wars and the fight for consumers are now making it a more difficult business.
On Thursday, Disney’s shares fell nearly 9% in reaction to the company’s results and inability to make streaming work as a profitable business so far.
As part of its push to reduce the operating losses in its streaming business, Disney
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said it would remove some content from its streaming platforms, and going forward, it would produce lower volumes of content, the most costly element of the streaming business. In the second quarter, Disney reduced its operating losses in its direct-to-consumer business to $659 million, down from $887 million in the year-ago period, due to improved results at Disney+ and ESPN+. Those improvements were partially offset by lower operating income at Hulu.
Disney’s high content costs mirror the content cost issues that have plagued Netflix Inc.
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since it began streaming content and de-emphasized its mail-order DVD business. “It’s critical we rationalize the volume of content we’re creating and what we’re spending to produce our content,” Disney Chief Executive Bob Iger told analysts on a call late Wednesday.
Disney also said it would increase the price of its ad-free version of Disney+, and it would roll Hulu content into that streaming service, as part of its efforts to consolidate its business and create a one-app experience for consumers.
Netflix too has gone all-in on a lower-cost, ad-supported service, something that its co-founder and now chairman Reed Hastings said for years the company would never do. And Netflix has also raised prices, after its soaring subscriber growth burst during the pandemic ground to a halt in the past year.
On Wednesday, Barclays analyst Tim Long said in a note that Apple Inc.
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will lose billions of dollars on its streaming service, Apple TV+, and its incremental spending on content will take cash away from its latest $90 billion stock-buyback plan.
Streaming has evolved from a low-priced service with no ads to now ad-supported services, less content, and now at least with Netflix, accounts that cannot be shared with nonfamily members. The streaming business is starting to look less fun for consumers and more costly for the players involved in this streaming war, as each company continues to spend billions to stay in it.
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This story originally appeared on Marketwatch
