Disney’s Streaming Ambitions: A Mixed Picture Amid Earnings Success

Disney’s recent earnings report has painted a complex picture of the entertainment giant’s streaming strategy, with strong financial performance tempered by questions about subscriber growth and content engagement.

Following Disney’s better-than-expected earnings announcement, which triggered a significant stock price increase, media industry veteran Tom Rogers offered a nuanced assessment of the company’s position in the streaming landscape during an appearance on CNBC’s “Fast Money.”

“You’ve got to give them hats off on the numbers,” Rogers acknowledged, particularly highlighting Disney’s achievement as “the first legacy player for its streaming revenues to exceed its linear revenues.” This milestone represents a significant transition in Disney’s business model as traditional television continues to decline.

However, Rogers, the former NBC Cable president and current Target Media chairman, expressed reservations about the company’s streaming subscriber growth. “I like it. I don’t love it,” he said, noting that Disney reported 1.4 million new streaming subscribers—a figure he characterized as modest compared to Netflix’s performance.

“Netflix grew 41 million over the last 12 months. That is not strong performance,” Rogers stated on CNBC. “For the first six months of the year, Disney Plus is down… they’re under a million subs for the first six months.”

Of particular concern to Rogers was Disney’s streaming advertising revenue, which he noted was “sequentially down 13%” despite a broader industry trend of advertising dollars shifting from traditional television to streaming platforms. “Hulu is the granddaddy of advertising-supported streaming. And they’re down 13% sequentially,” he pointed out.

Rogers also raised questions about the quality of Disney’s subscriber additions, suggesting many came from promotional pricing—”a $2.99 promo for Hulu and Disney+ for four months against the typical price of $10.99″—or from bundling arrangements with cable providers where “people get it but they don’t watch it.”

Content engagement presents another challenge. According to Rogers, Disney faces “an engagement issue on their original television production,” with the acquired program “Bluey” accounting for 9% of all viewing on Disney+. While Disney films perform well on the platform, Rogers noted that “the Disney originals don’t” attract comparable viewership.

Despite these concerns, Disney’s parks division demonstrated remarkable resilience. “The parks really did perform against an environment where travel seems to be slowing down, particularly international travel,” Rogers observed. The company’s expansion plans, including “Abu Dhabi and new cruise ships,” represent significant growth opportunities.

Looking ahead, Rogers identified the upcoming ESPN flagship announcement as a potential catalyst for Disney’s streaming business. The announcement is expected to reveal not only pricing and branding details but also bundling strategies with Disney+ and Hulu. Rogers suggested that an integrated package offering “all family sports kids show adult programming” with “a great interface and great recommendations” could “really catalyze their streaming business.”

While Disney has achieved profitability in its streaming operations, Rogers cautioned that margins remain significantly lower than in the company’s traditional cable business, which historically enjoyed “margins of 45 to 55%.” He expressed skepticism about the potential for substantial margin expansion, citing the “massive allocation of costs based on these big sports rights” and the need for investment in “local programming for international distribution.”

As Disney continues its transformation in a rapidly evolving media landscape, the company faces the dual challenge of growing its streaming subscriber base while improving profitability—a balancing act that will likely define its strategy in the quarters ahead.

Source: CNBC’s “Fast Money” interview with Tom Rogers