Walt Disney's surprise profit in its streaming entertainment division was eclipsed by a drop in its traditional TV business and weaker box office, sending its stock tumbling 10%, on track for its deepest one-day drop in 17 months, Reuters reports.
Like other media companies, Disney has been trying to adapt to consumer migration from cable television to streaming entertainment, and had promised Wall Street that its streaming operation would become profitable by September.
The division has been losing money since Disney+ debuted in 2019 in a major push by the company to compete with Netflix.
However, revenue from the traditional television business declined 8% to $2.77 billion and operating profit fell 22% from a year ago.
That decline reflected lower ad revenue and the impact of Disney's new TV distribution deal with Charter Communications as the second-largest cable TV and broadband company dropped eight of Disney's cable networks.
The direct-to-consumer entertainment division, which includes the Disney+ and Hulu streaming services, reported operating income of $47 million for the January-March period, compared with a loss of $587 million a year earlier.
But the combined streaming business with ESPN+ lost $18 million. The division had lost $659 million in the prior year.
Bob Iger, who came out of retirement to revamp Disney in November 2022 and defeated board challenges from activist investors last month, instituted cost cuts that are expected to reach at least $7.5 billion by the end of September.
He also unveiled a 10-year, $60 billion investment in theme parks and announced plans for a standalone ESPN streaming app, among other efforts.
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