Disney passed a key milestone in fiscal 2023, generating more revenue from streaming than from linear TV.
The media giant continues to reduce spending on film and television content, including sports, with total spending falling to $27.2 billion from $29.9 billion in fiscal 2022. This figure includes original titles for the film studio, streaming platforms and television networks along with sports rights and license fees. Efforts to reduce these costs were accompanied by broader staff cuts and other spending aimed at achieving $7.5 billion in savings. CEO Bob Iger said earlier this month that the company expects total spending on film and TV content to be around $25 billion in the current fiscal year.
The new data was disclosed this evening in the company’s annual report filed with the SEC. (Read the full breakdown here.) While the company released fourth-quarter and full-year numbers earlier this month, as is customary, it provides a more comprehensive and final breakdown of the 10K.
Affiliates’ fiscal 2023 revenues from Disney’s linear networks transmitted on cable, satellite and online pay television systems were eclipsed by streaming for the first time. In entertainment and sports, affiliate revenue was just $16.9 billion, down from $17.5 billion in fiscal 2022. Subscription revenue from direct-to-consumer streaming outlets like Disney+, Hulu and ESPN+ grew to $17.9 billion from $15.3 billion in the previous year.
Like all programmers with a stake in the traditional pay-TV package, Disney is going through a period of dramatic change. Local and national broadcast and cable networks continue to generate significant losses, but they also see a steady decline in viewership as the number of consumers continues to increase in streaming. Last summer, Iger stated that linear networks “may not be the backbone” of the company’s future business, and as a result, a number of competitors have emerged for the company’s local stations and ABC.
Cutting the cord also took a toll on network penetration last fiscal year, with ESPN shrinking to 71 million households from 74 million in fiscal 2022. At its peak just over a decade ago, the sports powerhouse was just north of 100 million houses. The filing also notes, without naming names, a key carriage agreement reached in September with Charter Communications. That pact included mainstays such as ESPN, ABC and Disney Channel and added several key streaming provisions, but left Freeform, FXX and other networks without linear coverage on Charter, the No. 2 U.S. cable operator
Disney recently reorganized into three divisions: Entertainment, Sports and Experiences, a configuration that has provided a new degree of visibility to ESPN’s performance. CEO Bob Iger is exploring a number of strategic options for ESPN and said the company is looking for an investment partner to help it with distribution as it prepares to roll out a robust streaming offering, including a popular lineup of live games, likely over the next few years.