Disney addressed the the future of its linear assets and its revenue declines in both broadcast and cable during its third quarter for 2023, noting that linear is still “highly profitable” for the company. This focus came as conversations continue to swirl about Disney potentially selling its linear assets, such as ABC.
“While linear remains highly profitable for Disney today, the trends fueled by cord-cutting are unmistakable. As I’ve stated before, we’re thinking expansively and considering a variety of strategic options,” CEO Bob Iger said during his opening remarks. “However, we’re fortunate to have an array of extremely productive television studios that we will rely on to continue providing exceptional content for audiences well into the future.”
Linear wasn’t included by name as one of the three main businesses that CEO Bob Iger highlighted during the beginning of the earnings call. Those three businesses, which Iger noted “will drive the greatest growth and value creation over the next five years,” were the company’s film studios, parks businesses and streaming. But while addressing the “practical considerations” of separating linear assets like ABC or National Geographic from ESPN and direct-to-consumer platforms like Hulu, Iger elaborated on linear’s role in the company’s current structure.
“Clearly, if we are to do anything significant in terms of strategic direction for the linear nets, we have to keep in mind the need for content to ultimately fuel our DTC businesses, notably, as you mentioned, Hulu,” Iger said. “Anything that is to be done would be done with an eye toward maintaining a rich flow of content to fuel our growth business, and that will be streaming.”
Iger also noted that there would be “obviously complexity” when it came to decoupling linear networks from ESPN but “not that we feel we can’t contend with if we were to ultimately create strategic realignment.”
During the company’s third quarter, revenue for domestic channels saw a 4% decrease, dropping to $5.5 billion. That’s in comparison to the $5.7 billion the company saw around this time in 2022. Operating income also decreased 14% from $2.1 billion in 2022 to $1.8 billion in 2023. This decrease in operating income was due to lower results for both broadcast and cable.
According to Disney’s third quarter earnings report, the decrease in broadcast was due to lower results from ABC and owned television stations. This quarter saw lower advertising revenue year-over-year as well as higher marketing costs for ABC. That lower ad revenue was chalked up to lower average viewership for ABC and lower rates for owned television stations.
As for cable, the lower operating income was driven by higher sports programming and production costs as well as lower affiliate revenue. This was due to contractual rate increases for NBA and Formula One programming. This quarter also brought about lower affiliate revenue, resulting from a decline in subscribers. This was partially offset by a modest increase in advertising revenue, which reflected higher impressions and rates at ESPN. These were offset by lower impressions at Disney’s non-sports channels.
Back in July, Iger sent shockwaves throughout the industry when he said that the company’s linear TV offerings — which include ABC, FX, National Geographic and Freeform — “may not be core” to Disney’s future.
