The Walt Disney Company (DIS) and DirecTV recently reached an agreement that brings back college football and other programming to satellite TV providers over 11 million subscribers. The agreement offers enhanced choice, value and flexibility to their mutual customers.
As a result, Disney’s full linear suite of networks has been restored for DIRECTV, DIRECTV STREAM and U-verse subscribers as the two companies work to finalize a new multi-year deal. As the entertainment landscape changes, DIS’s multi-channel approach could unlock new revenue streams and drive future growth.
Expand reach through traditional and streaming platforms
The renewed partnership between Disney and DirecTV comes at a critical time when consumer viewing habits are increasingly split between traditional linear TV and streaming services. As part of the deal, DirecTV will now offer customers more flexibility with multiple genre-specific packages, including those focused on sports, entertainment, and kids and family programming.
For example, the deal includes the continued carryover of Disney’s entertainment, sports and news programming from its linear portfolio, which includes ABC-owned television stations, Disney-branded channels, Freeform, the FX networks and National Geographic channels. Some DirecTV packages will also include Disney’s top streaming services—Disney+, Hulu and ESPN+.
In a joint statement the companies he said: “DIRECTV and Disney have a long history of connecting consumers to the best entertainment, and this agreement furthers that commitment by recognizing both the tremendous value of Disney content and the evolving preferences of DIRECTV customers.”
This strategic agreement bridges the gap between traditional and digital viewing preferences. DirecTV’s subscriber base, which has been slowly dwindling due to increased cord-cutting, now has access to a wider range of content options through Disney’s streaming services. For customers still tied to satellite TV, this hybrid model gives them a reason to stick around while giving Disney access to an audience that might not have subscribed to its streaming services independently.
Combining linear TV programming with streaming services gives DIS a competitive edge, especially as the entertainment giant looks to tap into both sides of the evolving content landscape. The inclusion of Disney+, Hulu, and ESPN+ in DirecTV’s packages serves several purposes. First, it provides a gateway for traditional TV subscribers to explore Disney’s streaming offerings, potentially turning them into long-term streaming customers.
Second, this combination strategy solidifies Disney’s position in the streaming wars, where competition from platforms such as Netflix, Inc. (NFLX), Amazon.com, Inc. (AMZN) Amazon Prime and Apple Inc. (AAPL) Apple TV+ is wild.
DIS can leverage its extensive content library to cater to diverse viewer preferences. Families may gravitate toward kid-friendly programming on Disney+, sports fans will appreciate the breadth of ESPN+, and fans of original series and award-winning content can indulge in Hulu’s offerings. The diversity of content will allow the company to attract a wider audience, which could lead to the growth and retention of subscribers on its platforms.
Potential financial gains and a case for Disney stock
For investors, DIS’s multi-channel strategy is an encouraging sign. Disney has long been a dominant player in the entertainment industry, and this renewed partnership with DirecTV further underscores its ability to adapt to changing market conditions. As Disney continues to diversify its revenue streams—balancing traditional television and its increasingly lucrative streaming business—its future earnings potential looks strong.
Including Disney+, Hulu and ESPN+ in DirecTV’s packages gives Disney a more sustainable and diversified revenue model, which could be especially important as the company faces intense competition in the digital streaming space. Disney’s unique combination of original programming, sports content and caps and family entertainment gives it a distinct advantage in attracting and retaining subscribers.
In addition, DIS’s continuous and linear programming continues to captivate audiences and critics alike, with the company garnering impressive 183 nominations at this year’s Primetime Emmy® Awards— a record for Disney and more than any competitor.
DIS delivered an excellent financial performance in the third quarter, beating analysts’ estimates for revenue and profit as the company’s combined streaming businesses delivered earnings earlier than expected. For the quarter ended June 29, 2024, the company reported revenue of $23.16 billionbeating analysts’ expectations of $23.09 billion.
Disney’s division’s total operating income rose 19% year over year to $4.23 billion, driven by strong results for its entertainment unit, especially streaming. Entertainment operating income nearly tripled year-over-year due to better performance in the Direct-to-Consumer (DTC) and Content Sales/Licensing and Other segments.
The company’s combined streaming business, which includes Disney+, Hulu and ESPN+, reported an operating profit of $47 million, compared to an operating loss of $512 million in the same period in 2023. Additionally, the company posted adjusted EPS of $1.39, up 35% compared to the previous quarter. That compared to the consensus EPS estimate of $1.19.
Due to strong third-quarter financial performance and support from its balanced asset portfolio, DIS has set a new full-year adjusted EPS growth target of 30%. The company added that it remains on track to improve the profitability of its combined streaming businesses in the fourth quarter, with both Entertainment DTC and ESPN+ expected to be profitable.
Bottom line
The renewed Disney-DirecTV deal is poised to unlock new growth opportunities by expanding Disney’s reach across both traditional linear TV and streaming platforms. By combining Disney+, Hulu and ESPN+ with DirecTV packages, Disney will effectively tap into untapped audiences, diversify its revenue streams and strengthen its position in the competitive streaming market.
With the company’s strong financial performance, improving profitability in its combined streaming business and diversified portfolio, this multi-channel strategy positions Disney for continued subscriber and earnings growth, making DIS stock an attractive choice for investors.