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Home » Disney Content Sales/Licensing Unit Posts $50 Million Q2 Operating Loss; Studio Pulling Streaming Content

Disney Content Sales/Licensing Unit Posts $50 Million Q2 Operating Loss; Studio Pulling Streaming Content

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Erik Gruenwedel

The Walt Disney Co. plans to pull select content from its streaming platforms, including Disney+ and Hulu, in an effort to jumpstart its content/licensing business going forward.

The move is expected to generate an impairment charge of from $1.5 billion to $1.8 billion in next quarter, according to CFO Christine McCarthy.

“The charge will be primarily recognized in our third quarter as we complete our review and remove the content,” McCarthy said on the fiscal call. “Going forward, we intend to produce lower volume of content in alignment with this strategic shift.”

The strategy follows a similar move by Warner Bros. Discovery, which has pulled content from HBO Max to distribute through third-party transactional and AVOD platforms. Notably, the horror movie Evil Dead Rise was pulled as a Max original to be released theatrically, where it generated more than $100 million at the box office.

In the second quarter, ended April 1, Disney’s “content sales, licensing and other” business unit reported an operating loss of $50 million compared with operating income of $16 million in the prior-year period. Revenue increased 18% to $2.2 billion from $1.86 billion in the prior-year period.

Content sales/licensing, which includes home entertainment, attributed  the decrease to lower TV/SVOD distribution results, partially offset by an improvement at theatrical distribution, which reached $767 million in the quarter, up from $224 million in the prior-year period. Home entertainment revenue reached $148 million, down from $230 million in the previous-year period.

The decrease in TV/SVOD distribution results was primarily due to lower sales volumes of film content, which included the impact of the shift from licensing content to third parties in order to distribute it on the company’s DTC streaming services.

The improvement at theatrical distribution was due to the continued success of Avatar: The Way of Water, which was released in the first quarter of the current year, partially offset by the comparison to the prior-year quarter income from the co-production (with Sony Pictures Entertainment) of Marvel Studios’ Spider-Man: No Way Home.

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The current quarter included the release of Ant-Man and the Wasp: Quantumania whereas the prior-year quarter included the release of 20th Century Studios’ Death on the Nile.

“In the fiscal third quarter, we anticipate [DTC’s] operating results will decline by about $150 million to $200 million from the prior year, driven primarily by the marketing of theatrical releases, with key titles, Elemental, Indiana Jones and the Dial of Destiny not premiering until very late in the quarter,” McCarthy said.

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