Disney Forecasts Q3 Loss Due To ICC Rights

The Walt Disney Company anticipates a decline in its streaming sector's earnings in Q3, attributed to the digital rights of the International Cricket Council (ICC) owned by Disney+ Hotstar.

“We are forecasting a loss for Entertainment DTC in the third quarter, the vast majority of which is due to Disney+ Hotstar's ICC cricket rights,” said Hugh Johnston, CFO, Walt Disney during the earnings call. 

He further mentioned the projection of incurring expenses for linear ICC rights at Star India in Q3. Star India, the parent company of Disney+ Hotstar has invested $3 billion in acquiring ICC media rights until 2027. The television rights for the 2023-27 cycle were sublicensed to Zee Entertainment by Star India. However, following the collapse of the merger agreement with Sony Pictures Networks India, Zee opted out of the deal.

The Direct-to-Consumer entertainment segment showed profitability in the second quarter. However, it anticipates a softer performance in Q3, primarily due to Disney+ Hotstar. Nevertheless, the company remains optimistic about the combined streaming businesses being profitable in the fourth quarter, representing a growth opportunity in the future. Moreover, it expects profitability to further improve in fiscal 2025.

“And while we are anticipating a softer third quarter, due in large part to the seasonality of our India sports offerings, we fully expect streaming to be a growth driver for the Company in the future and we have prioritized the steps necessary to achieve this,” said Bob Iger, Walt Disney CEO.

Sports operating income decreased from $794 million to $778 million this quarter, with Star India's sports segment loss decreasing by 73 per cent to $27 million. The decline is attributed to reduced programming and production costs due to the non-renewal of certain rights, partially offset by higher costs for Indian Premier League matches. 

Walt Disney's streaming entertainment services reported a profit of $47 million in Q2. Disney+Hotstar's paid subscribers dropped from 38.3 million to 36 million in Q2, leading to a decline in Average Monthly Revenue Per Paid Subscriber from $1.28 to $0.70 due to decreased advertising revenue. However, International Disney+ revenue per paid subscriber increased from $5.91 to $6.66.