LOS ANGELES - Walt Disney chief executive Bob Iger acknowledged that the entertainment company faces a “challenging environment” in the near term on Wednesday, but he emphasised progress in cutting costs and focusing on creativity, even as quarterly results showed Disney’s soft spots.

Disney’s stock rose nearly 3 per cent in after-hours trading, as Mr Iger touted US$1 billion (S$1.34 billion) in operating income improvement at the company’s streaming business over the last three quarters, which is aiming for profitability in 2024.

But he also acknowledged the need to improve the quality of Disney’s films, to position the company’s flagship sports brand, ESPN, for streaming directly to consumers, and to resolve the writers’ and actors’ strikes in Hollywood that have halted much film and television production.

“I returned to Disney in November, and I’ve agreed to stay on longer, because there was more to accomplish before our transformation is complete,” Mr Iger said.

The company beat Wall Street’s profit expectations for its fiscal third quarter and said it was on track to cut costs by more than the US$5.5 billion it promised investors in February.

Disney also posted quarterly revenue below expectations and fell slightly behind analyst projections for United States subscribers of its streaming service Disney+.

The media conglomerate said it will raise by 27 per cent the price of the ad-free tier of the Disney+ service to US$13.99 and hike by 20 per cent the no-ad version of Hulu, another streaming service.

Looking for ways to attract and retain subscribers in a competitive streaming market, Disney also announced it would launch ad-supported streaming in Europe and Canada and provide US subscribers with a new, ad-free package in coming months.

Mr Iger said he would address the issue of password sharing in 2024, echoing Netflix.

He said Disney will reduce the number of titles it releases and also the cost per title.

Revenue just misses

Disney said it cut losses at its streaming services to US$512 million in its fiscal third quarter from about US$1.1 billion a year ago.

It added 800,000 Disney+ subscribers, 100,000 subscribers shy of analyst estimates, and shed 12.5 million subscribers to the Disney Hotstar service in India, or nearly a quarter of its subscribers, as it gave up rights to Indian Premiere League cricket matches.

“Disney will have to cut prices from current levels in an effort to stimulate demand and defend its market share in an increasingly competitive industry,” said Investing.com senior analyst Jesse Cohen.

Disney’s revenue for the quarter ended July 1 rose 4 per cent to US$22.33 billion from a year earlier, just short of Wall Street estimates, according to Refinitiv.

It delivered per-share earnings of US$1.03, when excluding certain items, beating Wall Street projections of 95 US cents a share.

The company took US$2.65 billion in impairment and restructuring charges in the quarter, reflecting the cost of removing some content from its streaming services, terminating licensing agreements and US$210 million in severance payments to laid-off workers.

Disney’s traditional television business continued its decline.

Higher sports programming production costs and lower affiliate revenue dragged down the performance of its cable channels.

TV revenue fell 7 per cent to US$6.7 billion, while operating income fell 23 per cent to US$1.9 billion.

Disney’s direct-to-consumer business reported a 9 per cent increase in revenue to US$5.5 billion, as the average revenue per subscriber rose at Disney+ and Hulu.

Content sales and licensing, the unit that includes film and television sales, reported a deeper operating loss of US$243 million in the quarter, compared with a loss of US$27 million a year ago, as some movies disappointed, including the live-action remake of The Little Mermaid.

Disney’s Parks, Experiences and Products group reported a 13 per cent increase in revenue in the quarter, to US$8.3 billion, and an 11 per cent bump in operating income to US$2.4 billion.

The results were buoyed by the rebound of the Shanghai Disney Resort, which was open for the full quarter compared with the same time a year ago, when Covid-19 forced the park to be closed for all but three days.

The unit had lower operating income at its domestic parks, due to decreases at Walt Disney World Resort in Orlando, Florida. REUTERS