First Netflix cracked down on sharing passwords, now Disney+ is following suit. The entertainment giant wants to make its streaming business profitable.
The streaming service Disney+ wants to put its announced action against password free riders into practice in the summer. Disney currently allows accounts to be shared, but in the future users outside of a shared household will have to pay for their own subscription. Netflix has been cracking down on the sharing of passwords for months – and has gained more subscribers as a result.
Disney wants to bring its streaming business into the black by the end of September. In the last quarter it posted an operating loss of $216 million.
Taking action against password free riders involves risks: disgruntled users could simply switch to the competition. However, Disney is hoping for the attractiveness of its streaming offering with films and series such as “Star Wars” and the Marvel superheroes.
Disney universe including games like “Fortnite”
Disney boss Bob Iger is also betting big on the games business. The group is investing $1.5 billion in the developer company Epic Games (“Fortnite”). Together they want to develop a “Disney universe” in which, among other things, you can buy games as well as virtual and later perhaps physical items, said Iger on the TV channel CNBC. It should exist alongside Epic’s online game “Fortnite” but be linked to it. However, development could take “a few years,” Iger said.
Disney once again benefited from strong business with its theme parks and cruise ships in the last quarter. Wall Street’s focus for months has been on changes in the entertainment giant’s media business. The cable TV business in the US, which has been a reliable moneymaker over the years, is shrinking – as more and more people switch to streaming. Like other Hollywood companies, Disney set up its own streaming service and accepted high losses in order to catch up with industry leader Netflix.
Losses in cable TV, but gains in the streaming market
In the last quarter, sales in cable TV fell by twelve percent to 2.8 billion dollars (2.6 billion euros), as Disney announced after the US stock market closed. The division also posted an operating profit of $1.24 billion – seven percent less than a year earlier. Revenues in the streaming business with Disney+ and the sports offering ESPN+ rose by 14 percent to a good six billion dollars. The operating loss of $216 million was already a significant improvement compared to the $1 billion loss a year ago.
At the same time, the number of subscribers to the core Disney+ offering fell by one percent to 111.3 million. The group expects an increase of 5.5 to 6 million users in the next few months. Netflix recently had over 260 million customer households.
Business with theme parks and fan merchandise is going well
The theme parks and merchandise business brought in an operating profit of $3.1 billion on $9.1 billion in sales in the last quarter.
A year ago, Iger set a goal of reducing costs by $7.5 billion. The savings will probably be even higher, he said.
Disney’s consolidated sales remained virtually unchanged at $23.5 billion. Quarterly profit rose from $1.28 to $1.9 billion. The austerity measures contributed around $500 million to this, emphasized Iger. Disney shares rose almost seven percent in after-hours trading.
Source: Stern
