Disney isn't launching its new streaming service until later this year, but investors are already learning the economic challenges of the business, according to CNBC.
The media company said in a filing on Friday that its investment in Hulu was the primary contributor to a $580 million loss in equity investments in the fiscal year that ended Sept. 30. Additionally, Disney lost $469 million in its direct-to consumer-segment, largely from BAMtech, the streaming technology that powers ESPN+ and other over-the-top services.
That's more than $1 billion associated with streaming, the area where CEO Bob Iger is focusing his attention. Disney will debut its Disney+ offering later in 2019 to better compete with Netflix and Amazon.
Losses in streaming will likely surge in the early days of the venture, as content and technology costs spike, said Rich Greenfield, an analyst at BTIG. Disney has also yet to assume control of another 30 percent of Hulu, part of its $71.3 billion deal for the majority of 21st Century Fox. If Disney were to acquire Comcast's 30 percent stake in Hulu, that would further increase operating losses.
"Streaming requires a strong stomach for losses, especially as you are playing catch-up," Greenfield said in an interview.
Disney is hoping that, over time, millions of paying customers will subscribe to Disney+ for its new original content and library of Disney movies and TV shows. Pricing hasn't been disclosed. Netflix, which announced its quarterly earnings on Thursday, has 139 million global subscribers and just informed them that it's raising prices by 13 percent to 18 percent.
Disney announced its acquisition of a majority stake in BAMtech (formerly owned by Major League Baseball) in 2017, so its report for 2018 is the first to show consolidated earnings results for the company.
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