Disney forecasts wider streaming loss — Shares fall 5% in extended trading

But a wider loss this period, which McCarthy characterized as a “little blip,” rows back some of the progress Disney has made toward achieving profitability in its streaming businesses. The company is simultaneously seeing a sharp decline in its traditional TV business, which includes ABC and ESPN.

To improve the financial performance of its streaming business, the company introduced a new ad-supported tier for Disney+ in December and raised the price of the ad-free version by 38% to $11 a month.

While boosting revenue, the move appeared to cost the company customers: Paid subscriptions to Disney+ fell to 157.8 million. Analysts had expected 163.1 million. It’s the second straight quarter that Disney+ has lost subscribers.

Chief Executive Officer Bob Iger said on the call with analysts that the Burbank, California-based company plans to increase the price of the ad-free Disney+ service again this year. Disney also will be removing films and TV shows from its services to reduce costs, leading to a charge of up to $1.8 billion.

Iger plans to combine Hulu and Disney+ content on a single app later this year. The move suggests the company will ultimately buy Comcast Corp.’s one-third stake in Hulu. The two companies have an agreement for Disney to purchase that stake starting next year in deal that values Hulu at a minimum of $27.5 billion. Hulu subscriptions were flat in the second quarter.

Comcast and Disney have held “cordial” talks, Iger said.

Wall Street’s view of the streaming TV industry has shifted over the past year, with investors now focused more on profitability than subscriber growth. Disney’s red ink from streaming ballooned under former CEO Bob Chapek, who was ousted in November after the company reported a quarterly loss of nearly $1.5 billion.

Total revenue at Disney rose 13 percent to $21.8 billion in the period that ended April 1, driven by strong performance of the company’s theme parks. Adjusted earnings of 93 cents per share decreased from the same period last year.

The company’s resorts and consumer products unit boosted income by 23 percent to $2.17 billion, in part due to a return to profitability for the company’s international theme parks.

Profit at Disney’s traditional TV business, including the ESPN cable networks and ABC’s broadcasting business, fell 35 percent to $1.83 billion, the result of higher sports programming costs and lower advertising.

Last week, Warner Bros Discovery Inc. and Paramount Global reported significant drops in revenue from TV advertising.

Under Iger, Disney has overhauled its structure by creating three reporting units: Entertainment, Parks and ESPN, which includes the sports network and the ESPN+ streaming service.

As part of a plan to Disney on a better financial footing, Iger’s cutting $5.5 billion in annual costs and culling 7,000 jobs from the entertainment giant’s workforce. The recent cost cutting led to the departure of streaming chief Michael Paull and most of the product and technology teams that supervised the successful rollout of Disney+ in 2019.