Disney's Dismal Forecast Signals Struggling Film and TV Sectors

Disney Faces Investor Concerns Amid Mixed Financial Performance

Walt Disney Co. has faced some disappointment from Wall Street after releasing a cautious full-year profit forecast, which was influenced by challenges in its movie and television businesses. The company’s earnings for fiscal 2025 are expected to rise by 18% to $5.85 per share, excluding certain costs. However, this outlook fell short of what many analysts had anticipated, dampening the positive sentiment from its third-quarter report that highlighted growth in theme parks and streaming services.

Overall revenue for the three months ending June 28 reached $23.7 billion, meeting analyst expectations. Earnings per share, excluding specific items, rose to $1.61, surpassing the average estimate of $1.46. Despite this, Disney's stock dropped 2.10% to $115.85 in New York, although it has gained 4% so far this year.

Analysts, such as Jason Bazinet from Citigroup Global Markets, had hoped for an adjusted EPS guidance of $6. The decline in shares reflects ongoing concerns about the performance of Disney’s traditional television business, which once served as its primary profit source, and the underperformance of its film division. In contrast, the experiences unit, which includes cruises and theme parks, along with streaming services, is where the company is focusing its future growth.

Disney anticipates generating $1.3 billion in operating income from its direct-to-consumer streaming business in fiscal 2025, up from a previous forecast of $1 billion. The company also expects a 8% increase in operating income from its parks business in the current fiscal year, at the top end of earlier projections.

However, the traditional TV networks segment, which includes ABC and National Geographic, saw a 15% drop in revenue to $2.27 billion during the quarter. Operating income fell by 28% to $697 million due to declining viewership and lower advertising rates.

The film studios segment experienced a loss of $21 million in the quarter, impacted by the underperformance of Pixar’s Elio and Marvel Studios’ Thunderbolts. Analysts at Barclays Research suggested that write-downs related to these films contributed to the loss.

Despite improvements over the past year, the segment’s performance has deteriorated this calendar year, according to analysts led by Kannan Venkateshar. For the stock to improve, the segment needs to demonstrate more consistent performance, as content quality ultimately drives the rest of Disney’s operations.

As the legacy TV business struggles, Disney is taking steps to adapt to changing consumer behavior through a series of deals that will bring more sports content to ESPN, ABC, and its upcoming streaming service. Live sports remain a strong area on television, and ESPN has long been a key driver of Disney’s earnings.

To meet modern demands, Disney is revamping ESPN and building up its Hulu and Disney+ platforms. CEO Bob Iger stated that the company is making “major steps forward in streaming” and creating a unique proposition. This includes the launch of a new ESPN streaming app on August 21 for $30 a month, offering access to all traditional TV channels and interactive features. Additionally, the app will be available as part of a bundle with Hulu and Disney+ for $36 a month.

On Tuesday, Disney announced new deals with the National Football League (NFL), acquiring most of its media businesses in exchange for a 10% stake in ESPN. This deal deepens the partnership between the NFL and one of its top broadcast partners. The assets include the NFL Network cable channel and NFL RedZone, a subscription-based highlights service.

Following the transaction, Disney will hold a 72% stake in ESPN, while partner Hearst Communications Inc. will have 18%. The deal is subject to regulatory approvals and is expected to close by the end of 2026.

On Wednesday, ESPN detailed an expanded content deal with the NFL, including an extension of the NFL Draft rights, and announced a major new deal with TKO Group Holding Inc.’s World Wrestling Entertainment (WWE) to become the exclusive U.S. home of WWE Premium Live Events, including WrestleMania. The five-year contract, valued at over $1.6 billion, begins in 2026.

Iger emphasized that the NFL deal will boost Disney’s earnings in the first year after closing, increasing revenue and operating income for ESPN. It could also reduce churn rates for the ESPN app and bring in additional advertising.

In the coming months, Disney will integrate its Disney+ and Hulu streaming services into a single app, featuring a unified recommendation engine and a broader range of programming, including ABC News. Disney+ added 1.8 million new subscribers in the third quarter, bringing the total to 128 million.

Disney predicts that Disney+ and Hulu subscriptions will grow by more than 10 million in the current quarter, largely due to a recent deal with Charter Communications Inc., which will bring Hulu to Spectrum TV Select customers.

Starting in the first quarter of fiscal 2026, Disney will stop disclosing streaming subscriber numbers for Disney+ and Hulu, and in the fourth quarter of fiscal 2025 for ESPN+. The company believes that subscriber figures have become less meaningful for evaluating business performance and that this change aligns better with shifts in the media landscape. Instead, Disney will continue to report overall profitability for streaming.

Streaming rival Netflix Inc. made a similar move last year, shifting focus to new revenue streams, including its ad-supported plan.

Disney’s streaming businesses earned a quarterly profit of $346 million.

Disney’s experiences unit is expected to perform strongly in the fiscal fourth quarter, with bookings for experiences up about 6% so far this quarter. Bookings for Disney’s new cruise ship in Southeast Asia, set to sail from Singapore in December, are already sold out for the first two quarters of operation.

“This will give us the opportunity to sail the Disney brand in a region that has a huge Disney brand affinity,” Iger said. The ship, the Disney Adventure, will serve as a “floating ambassador for the Disney brand,” infused with the company’s intellectual property throughout.

Income at the theme-parks division grew 13% in the third quarter to $2.52 billion, with revenue advancing 8%.