Walt Disney Co. is set to experience a net loss in its direct-to-consumer business in fiscal year 2024, according to a new forecast from Guggenheim Securities. Michael Morris, media analyst of Guggenheim Securities, is now forecasting the company’s D2C business will post a net loss of $478 million for the company's fiscal year 2024, compared to the previously projected net income of $187 million.

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Morris attributed the loss to “steeper growth in programming and marketing expenditures in early fiscal year 2024,” but noted that there will be “improvement in segment profitability progression in the second half [of 2024]... exiting the year on a positive profit trajectory.” Guggenheim estimates that Disney will see top line growth for its direct-to-consumer revenues next year, climbing 16% to $25.4 billion from an estimated $21.9 billion for fiscal year 2023.

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Morris also projected that Disney’s D2C revenue projection could achieve near parity to the revenue from Disney’s linear TV networks ($25.7 billion).

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Disney isn’t alone in its pursuit of profitability for its direct-to-consumer businesses. Many legacy media companies have had similar struggles, recently announcing monthly consumer price increases and looking for ways to slow down accelerating streaming production costs. According to Ampere Analysis, production costs among six major companies -- Netflix, Amazon Prime Video, Disney+, Apple TV+, Paramount+ and Max/HBO Max — will be down 7% from the year before to $42 billion for original and acquired film and TV content in 2023.

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In response to the changing landscape, Disney recently announced a new “segmentation” structure, with the company now comprising three business groups: Disney Entertainment, ESPN, and Disney Parks, Experiences and Products.

Sources: https://www.mediapost.com/publications/article/390065/disney-d2c-business-to-post-net-loss-in-2024-gugg.html