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Disney to Incur Losses amid Huge Investment in Streaming Services

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Operating loss in the Direct-to-Consumer & International segment

The Walt Disney Company’s (DIS) Direct-to-Consumer & International segment posted revenue growth of 15% YoY (year-over-year) to $955 million in the second quarter of fiscal 2019. However, the segment’s operating loss widened from $188 million to $393 million in the quarter due to the company’s ongoing investment in its ESPN+ service, costs related to the upcoming launch of Disney+, Hulu losses, and higher losses from streaming technology services.

The loss was offset by an increase in its international channels driven by higher affiliate rates and lower sports-programming costs.

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Disney’s focus on streaming services

Disney has been investing significantly in its streaming services to take on established players such as Netflix and Amazon. Disney launched its first direct-to-consumer streaming service, ESPN+, in April 2018, and it’s massively investing in ramping up ESPN+. The company’s investments are also on the rise, as it’s set to release Disney+, its Disney-branded streaming service, on November 12 for $6.99 per month.

Disney has also included Hulu’s operations in the segment after acquiring a 30% stake and other premium media assets from 21st Century Fox in a $71.3 billion deal, which completed on March 20.

Disney’s stake in Hulu increased to 70% after AT&T’s WarnerMedia sold its 10% stake in Hulu for $1.43 billion in mid-April. Disney originally had a 30% stake in Hulu. Media giant Comcast is now also in talks to sell its 30% stake in the online streaming service to Disney, which would give Disney full ownership of Hulu.

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