At Extreme Investor Network, we believe in staying ahead of the curve when it comes to business news. Today, we’re diving into the world of streaming video and how Disney is proving Warren Buffett wrong in this ever-evolving landscape.
Warren Buffett, known as “The Oracle of Omaha,” famously expressed his skepticism about the streaming video business last year, stating that it wasn’t a good business and shareholders hadn’t seen great returns over time. However, Disney’s recent quarterly earnings results paint a different picture.
Disney has strategically focused on pulling back on content spending while steadily increasing subscribers for Disney+, Hulu, and ESPN+. This shift has not only made streaming a profitable business for Disney but has also positioned it as a more lucrative venture than traditional TV. According to Disney Chief Financial Officer Hugh Johnston, streaming is expected to generate enough operating income in fiscal year 2025 to offset the decline in operating income from linear TV. This forecast suggests that Disney’s entertainment direct-to-consumer operating income will see a substantial increase, potentially surpassing $1 billion in the coming fiscal year.
The success of Disney’s streaming services is evident in their recent earnings report. In the fiscal fourth quarter, Disney’s combined streaming platforms posted an operating income of $321 million, with entertainment streaming platforms (Disney+ and Hulu) generating $143 million in operating income for the year. This is a significant turnaround from last year’s loss of $2.5 billion in the entertainment streaming division.
The shift from traditional pay-TV to streaming has been met with skepticism from investors, who doubt whether subscription streaming can replace the profits generated by linear TV. However, Disney’s positive forecast suggests that streaming could potentially become a long-term replacement product for cable. As companies explore future bundles and consolidation to mitigate churn, streaming may prove to be a more sustainable business model.
Overall, Disney’s success in the streaming arena demonstrates the resilience of the media industry in adapting to changing consumer preferences. By staying agile and innovating in the streaming space, companies like Disney are not only thriving but also reshaping the future of entertainment consumption.
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