Dive Brief:

• The Walt Disney company reported a 4.4 million increase quarter-over-quarter in the number of paid subscribers for its Disney+ Core streaming services, growth that gives the entertainment company a “bit of a natural hedge in the way that our portfolio operates,” CFO Hugh Johnston said Thursday during the company’s fiscal Q4 earnings call.
• For its quarter ended Sept. 28, Disney reported 174 million subscriptions for its Disney+ Core and Hulu streaming services, and 120 million paid Disney+ Core subscribers, according to its earnings results.  
• The results leave the Burbank, California-based Disney “well-positioned” to entice consumers who are still clinging to “linear” or cable services, as well as those looking to move over to streaming — and “frankly, with what we've put on the service and what — the plans that we have to put more things on the service, I think in many ways, we're sort of a must-have platform inside of most households,” Johnston said.  

Dive Insight:

Johnston, a long-time alum of beverage company PepsiCo — where he served as CFO for 13 years — joined the entertainment service last November as its finance chief after the abrupt exit of previous CFO Christine McCarthy, CFO Dive previously reported.

He took the top financial seat as the entertainment company was facing a number of challenges, including flagging subscriber figures, a shareholder lawsuit, layoffs, and strikes by both writers and actors.

Together with returning CEO Bob Iger, Johnston and the company’s C-suite have honed in on improving growth both for its streaming business and for its theme parks. In August, the company hired YouTube alum Adam Smith as its chief product and technology officer for Disney Entertainment and ESPN. Smith’s role includes overseeing streaming channels such as the company’s Disney+ platform.

In his role, Smith has also moved to crack down on password sharing, including in expanding markets such as Latin America, CEO Bob Iger said. The company now has “password sharing or anti-password sharing initiatives…at over approximately 130 countries,” Iger estimated Thursday.

The company’s direct-to-consumer streaming segment generated its first-ever operating profit in the third quarter, posting a $47 million profit for its Q3 compared to a $512 million loss in the previous year period, CFO Dive previously reported.

For its Q4, Disney reported an operating income of $253 million for the direct-to-consumer segment, while recording a $143 million profit for the year ended Sept. 28, according to its earnings results. Overall, operating income for its entertainment segment — which includes direct-to-consumer, linear networks and content sales or licensing, hit $3.9 billion for the full year, compared to $1.4 billion for the prior year.

Disney is also targeting a 10% operating margin for its entertainment segment for its fiscal 2026, as well as double-digit growth in operating income for the segment, according to their earning release. Growing subscribers therefore remains a top focus when it comes to achieving that goal, Johnston said during the call in response to analyst questions.

The company is also looking to boost pricing and to make upgrades to its products and offerings that will improve engagement and reduce customer churn, with Smith in his new role taking point on such initiatives, he said.

“A lot of the growth that we're seeing right now is because of the exceptional content that's coming out of both the movie and the TV studios that's obviously our proprietary content,” Johnston said, referring to breakout hits such as Marvel’s Deadpool & Wolverine and Inside Out 2. “So that will certainly enable us to increase pricing over time.”

Disney has continued to see headwinds in other areas of the business. Growth in its experiences segment, which includes theme parks, was largely flat, in line with Q3 expectations — revenue for the segment grew by 1% for the quarter to $8.2 billion, according to its earnings report.