Disney CEO Bob Iger (Bob Iger) said the media giant plans to “drastically” reduce investment in the cable TV sector to make its streaming division a continuously profitable division.
Last summer, Eiger said he would take a “comprehensive” review of the entertainment giant's traditional TV assets, hinting at the possibility of adopting strategic choices including sales.
Eiger said on Wednesday that after analysis, the company determined that cable TV “will not become a growing business, but it may become an important part of our ability to attract consumers.”
Egg said Dana Walden, who is in charge of Disney TV studios, and Jimmy Pitaro of ESPN are tasked with reducing traditional online investments while “seamlessly” managing the streaming business.
“Both companies are managed by the same executives, and their goal is to drive profit growth,” he said at the Moffett Natanson Investor Conference.
An example of this duality is “Grey's Anatomy” and “Abbott Elementary” airing on ABC “soon,” or in some cases simultaneously, on the Hulu platform.
Eiger said the audience was different, and ABC's audience was “older” than Hulu's. “We're basically trying to get more viewers. We're amortizing the costs!” he added.
Although the executive said he still anticipates the erosion of cable TV users, the sector will “continue to drive profits because we are managing costs very effectively.”
Overall, “We're comfortable with our hands now because we're using these networks efficiently.”
Cable networks have always been a pain point for traditional media giants, as a bleak advertising environment has dragged down revenue, combined with a massive loss of pay-TV consumers.
Linear advertising and cable TV fees continued to drive revenue growth until the “cable choke” phenomenon appeared. But as ad buyers now switch from traditional TV channels to digital channels such as streaming media, ad companies are beginning to realize that they may never see the same level of return.
Disney said in its second-fiscal quarter earnings report that ESPN's domestic revenue fell 9% year over year to 780 million US dollars, mainly hampered by declining alliance revenue and fewer users.
The entertainment sector saw a similar situation in domestic cable network revenue, which fell 11% year over year in the quarter. The division's revenue declined by 18%. This was also blamed on the affiliate's lower revenue, as well as the decline in ad revenue.
On the other hand, streaming achieved a turnaround in the direct-to-consumer (DTC) portion of the entertainment sector (including Disney+ and Hulu), with operating profit of $47 million, compared to a loss of $587 million in the same period last year.
However, the entertainment industry is now mostly in trouble, and the company warned that it is expected that some DTC results of the entertainment sector will lose money in the third quarter. However, Disney expects the streaming business to be fully profitable in the fourth quarter of this year.