Disney's streaming business turns a profit in first financial report since challenge to Iger

The Walt Disney Co. swung to a loss in its second quarter because of restructuring and impairment charges, but its adjusted profit topped expectations and its streaming business turned a profit. Theme parks also continued to do well and the company boosted its outlook for the year.

While Disney said Tuesday that it foresees its overall streaming business softening in the current quarter due to its platform in India, Disney+Hotstar, it expects its combined streaming businesses to be profitable in the fourth quarter and to be a meaningful future growth driver for the company, with further improvements in profitability in fiscal 2025.

The direct-to-consumer business, which includes Disney+ and Hulu, posted quarterly operating income of $47 million compared with a loss of $587 million a year earlier. Revenue rose 13% to $5.64 billion.

For the combined streaming businesses, which includes Disney+, Hulu and ESPN+, second-quarter operating loss shrunk to $18 million from $659 million, while revenue improved to $6.19 billion from $5.51 billion.

Disney+ core subscribers climbed by more than 6% in the second quarter.

Yet the improved picture for Disney on streaming arrives with its cable business in decline. That segment saw revenue slide 8% in the most recent quarter.

“Looking at our company as a whole, it’s clear that the turnaround and growth initiatives we set in motion last year have continued to yield positive results,” CEO Bob Iger said in a prepared statement.

Speaking during Disney's conference call, Iger said that the company plans to add an ESPN tab to Disney+ by the end of the year, a maneuver that was previously made with Hulu. This will give U.S. subscribers access to some live sports and studio programming within the Disney+ app.

ESPN, Fox and Warner Bros. Discovery announced plans in February to launch a sports streaming platform in the fall that will include offerings from at least 15 networks and all four major professional sports leagues.

Iger also said that next month the company will start cracking down on password sharing for its streaming service in some markets, and will expand that crackdown globally in September.

While Disney has quality streaming content, Iger said that the company must now focus on building out its technology, similar to what rivals like Netflix have been doing. Those actions, including the password crackdown, are expected to improve profits.

It’s the first financial report since shareholders rebuffed efforts by activist investor Nelson Peltz to claim seats on the company board last month, standing firmly behind Iger as he tries to energize the company after a rough stretch.

Thomas Monteiro, senior analyst at Investing.com, said that some Disney investors may have been expecting more from the quarterly report, but that “the company has tilted its operation back to its core business model, which is more conservative by nature.”

Monteiro was focused on the company's efforts to turn its streaming division profitable.

“The big surprise of the day came on the streaming front, which finally managed to bring profits - way ahead of predictions - amid Hollywood’s massive strike period,” Monteiro said. "This indicates that perhaps the more global, low-production-cost Netflix-like model is probably the way to go in an operation that needs to rethink its growth expectations as a whole.”

Revenue at Disney's domestic theme parks rose 7%, while its theme parks overseas reported a 29% increase.

But Disney acknowledged wrestling with higher costs at its theme parks during the quarter due to inflation.

The company said that there was increased spending by guests at Walt Disney World due to higher ticket prices, while Disneyland guests boosted their spending due to an increase in ticket prices and hotel room rates.

Overseas, Hong Kong Disneyland benefited from the opening of World of Frozen, a section of the park that includes rides based on the popular “Frozen” movies, in November.

Similar to many tourist destinations, Disney is continuing to adjust to post-pandemic travel.

“While consumers continue to travel in record numbers, and we are still seeing healthy demand, we are seeing some evidence of a global moderation from peak post Covid travel,” Chief Financial Officer Hugh Johnston said during the call.

For the period ended March 30, Disney lost $20 million, or a penny per share. That compares with a profit of $1.27 billion, or 69 cents per share, a year ago.

Restructuring and impairment charges surged to $2.05 billion from $152 million in the prior-year period.

Adjusted earnings, which stripped out the charges and other items, were $1.21 per share, easily beating the $1.12 per share that analysts polled by Zacks Investment Research predicted.

Disney said that due to its second-quarter performance, it now has a full-year adjusted earnings per share growth target of 25%. It previously predicted growth of at least 20%.

The Burbank, California, company's revenue rose to $22.08 billion from $21.82 billion a year earlier, but was slightly lower than Wall Street estimates of $22.13 billion.

Content sales and licensing revenue tumbled 40% because Disney didn't release any significant movie titles during the second quarter as compared with the prior-year period, which included the release of “Ant-Man and the Wasp: Quantumania.” The year-ago results were also helped by the ongoing performance of "Avatar: The Way of Water," which was released in December 2022.

Shares fell more than 10% Tuesday.

In February The Walt Disney Co. said that it was making “significant cost reductions” and reduced its selling, general and other operations expenses by $500 million in its first quarter. The company cut thousands of jobs in 2023.

In March allies of Gov. Ron DeSantis and Disney reached a settlement agreement in a state court fight over how Walt Disney World is developed in the future following the takeover of the theme park resort’s government by the Florida governor.

Last month character performers at Disneyland in California and the union organizing them, Actors’ Equity Association, said they had filed a petition for union recognition.

FILE - A Disney logo forms part of a menu for the Disney Plus movie and entertainment streaming service on a computer screen in Walpole, Mass, Nov. 13, 2019. Walt Disney's moved to a loss in its second quarter, hampered by significantly higher restructuring and impairment charges, but its streaming business was profitable and theme parks continued to be a strength. While The Walt Disney Co. said Tuesday, May 7, 2024, that it foresees its streaming business softening in the third quarter due to Disney+Hotstar, it expects its combined streaming businesses to be profitable in the fourth quarter and to be a meaningful future growth driver for the company, with further improvements in profitability in fiscal 2025. (AP Photo/Steven Senne, File)

LONDON (AP) — The host of a news conference about WikiLeaks founder Julian Assange's extradition fight wryly welcomed journalists last week to the “millionth” press briefing on his court case.

Deborah Bonetti, director of the Foreign Press Association, was only half joking. Assange’s legal saga has dragged on for well over a decade but it could come to an end in the U.K. as soon as Monday.

Assange faces a hearing in London's High Court that could end with him being sent to the U.S. to face espionage charges, or provide him another chance to appeal his extradition.

The outcome will depend on how much weight judges give to reassurances U.S. officials have provided that Assange's rights won't be trampled if he goes on trial.

Here's a look at the case:

Assange, 52, an Australian computer expert, has been indicted in the U.S. on 18 charges over Wikileaks’ publication of hundreds of thousands of classified documents in 2010.

Prosecutors say he conspired with U.S. army intelligence analyst Chelsea Manning to hack into a Pentagon computer and release secret diplomatic cables and military files on the wars in Iraq and Afghanistan.

He faces 17 counts of espionage and one charge of computer misuse. If convicted, his lawyers say he could receive a prison term of up to 175 years, though American authorities have said any sentence is likely to be much lower.

Assange and his supporters argue he acted as a journalist to expose U.S. military wrongdoing and is protected under press freedoms guaranteed by the First Amendment to the U.S. Constitution.

Among the files published by WikiLeaks was video of a 2007 Apache helicopter attack by American forces in Baghdad that killed 11 people, including two Reuters journalists.

“Julian has been indicted for receiving, possessing and communicating information to the public of evidence of war crimes committed by the U.S. government,” his wife, Stella Assange, said. “Reporting a crime is never a crime.”

U.S. lawyers say Assange is guilty of trying to hack the Pentagon computer and that WikiLeaks’ publications created a “grave and imminent risk” to U.S. intelligence sources in Afghanistan and Iraq.

While the U.S. criminal case against Assange was only unsealed in 2019, his freedom has been restricted for a dozen years.

Assange took refuge in the Ecuadorian Embassy in London in 2012 and was granted political asylum after courts in England ruled he should be extradited to Sweden as part of a rape investigation in the Scandinavian country.

He was arrested by British police after Ecuador’s government withdrew his asylum status in 2019 and then jailed for skipping bail when he first took shelter inside the embassy.

Although Sweden eventually dropped its sex crimes investigation because so much time had elapsed, Assange has remained in London’s high-security Belmarsh Prison while the extradition battle with the U.S. continues.

His wife said his mental and physical health have deteriorated behind bars.

“He’s fighting to survive and that’s a daily battle,” she said.

A judge in London initially blocked Assange’s transfer to the U.S. in 2021 on the grounds he was likely to kill himself if held in harsh American prison conditions.

But subsequent courts cleared the way for the move after U.S. authorities provided assurances he wouldn’t experience the severe treatment that his lawyers said would put his physical and mental health at risk.

The British government authorized Assange's extradition in 2022.

Assange's lawyers raised nine grounds for appeal at a hearing in February, including the allegation that his prosecution is political.

The court accepted three of his arguments, issuing a provisional ruling in March that said Assange could take his case to the Court of Appeal unless the U.S. guaranteed he would not face the death penalty if extradited and would have the same free speech protections as a U.S. citizen.

The U.S. provided those reassurances three weeks later, though his supporters are skeptical.

Stella Assange said the “so-called assurances” were made up of “weasel words.”

WikiLeaks Editor-in-Chief Kristinn Hrafnsson said the judges had asked if Assange could rely on First Amendment protections.

“It should be an easy yes or no question,” Hrafnsson said. “The answer was, ‘He can seek to rely on First Amendment protections.’ That is a ‘no.’ So the only rational decision on Monday is for the judges to come out and say, ‘This is not good enough.’ Anything else is a judicial scandal.”

If Assange prevails, it would set the stage for an appeal process likely to further drag out the case.

If an appeal is rejected, his legal team plans to ask the European Court of Human Rights to intervene. But his supporters fear Assange could possibly be transferred before the court in Strasbourg, France, could halt his removal.

“Julian is just one decision away from being extradited,” his wife said.

Assange, who hopes to be in court Monday, has been encouraged by the work others have done in the political fight to free him, his wife said.

If he loses in court, he still may have another shot at freedom.

President Joe Biden said last month that he was considering a request from Australia to drop the case and let Assange return to his home country.

Officials have no other details but Stella Assange said it was “a good sign” and Australian Prime Minister Anthony Albanese said the comment was encouraging.

FILE - WikiLeaks founder Julian Assange being taken from court, where he appeared on charges of jumping British bail seven years ago, in London, Wednesday May 1, 2019. Assange faces what could be his final court hearing in England over whether he should be extradited to the United States to face spying charges. (AP Photo/Matt Dunham, File)