Disney’s streaming business keeps growing, despite theatrical losses

Continued growth in streaming subscriptions and strong domestic tourism to its theme parks propelled Walt Disney Co.’s fiscal third quarter earnings, even as its theatrical results dipped, the company said Wednesday.

The Burbank media and entertainment giant reported $23.7 billion in revenue for the three-month period that ended June 28, up 2% compared with the same quarter a year earlier. Earnings before taxes totaled $3.2 billion, 4% higher than a year ago . Earnings per share were $2.92, up from $1.43 last year.

“We are pleased with our creative success and financial performance,” Disney Chief Executive Bob Iger said in a statement. “With ambitious plans ahead for all our businesses, we’re not done building, and we are excited for Disney’s future.”

The company’s entertainment division, which includes its studios, Disney+, Hulu and linear television business, reported $10.7 billion in revenue, 1% higher than a year earlier. Its operating income, however, totaled $1 billion, down 15% compared with the previous year. That was the result of lower results in content sales and licensing, which includes theatrical distribution, and linear television.

Disney’s content sales and licensing unit reported revenue of $2.3 billion, up 7% compared with a year ago , but recorded a loss of $21 million in operating income. The company attributed that to lower theatrical distribution results during the third quarter of this year, when it released Disney and Pixar’s original animated film “Elio,” which struggled at the box office, as well as Marvel Studios’ “Thunderbolts*,” which received strong critical reviews but had a middling commercial performance.

The earnings only captured part of the theatrical results for the live-action adaptation of “Lilo & Stitch,” which would go on to gross $1 billion in global box office revenue. The quarterly earnings were also negatively impacted by the comparison to last year’s “Inside Out 2” box office performance.

Disney’s linear networks including ABC and the Disney Channel continued to struggle, reporting revenue of $2.3 billion, down 15% compared with last year. Operating income fell 28% to $697 million. Part of that decline was due to the lower international results stemming from the company’s Star India merger.

Still, Disney’s streaming business saw gains during the third quarter, posting a 6% increase in revenue to $6.2 billion and operating income of $346 million, compared with a loss of $19 million a year earlier.

The company now has 183 million Disney+ and Hulu subscriptions.

Disney’s theme parks also boosted revenues, despite concerns about a drop-off in international tourism to the U.S. fueled by trade tensions. The experiences division, which includes the Disney theme parks, cruise line and Aulani resort and spa in Hawaii, reported revenue of $9.1 billion, up 8% compared with the previous year. Operating income rose 13% to $2.5 billion.

Disney said visitors spent more at the parks during the third quarter, and that its domestic parks and experiences operating income increased 22% to $1.7 billion.

Disney’s sports unit, which includes ESPN, reported revenue of $4.3 billion, down 5%, due to higher programming and production costs for the NBA and college sports rights and the lack of NHL Stanley Cup Finals rights, which Disney has every other year. Operating income was $1 billion, up 29% from last year.