Disney (DIS, $111.70) reports impressive growth in the online streaming market

Disney’s latest fiscal quarter report confirms forecast-beating earnings per share ($1.84 per share versus an estimate of $1.55 per share) and revenue ($15.30 billion versus $15.14 billion expected). Revenue in Disney's media networks business, which includes ESPN, rose 7% to $5.92 billion in the first quarter, compared to the year-earlier period, while its parks business was up 5% to $6.82 billion.

This impressive outcome may be attributed to Disney’s increased sales in media networks like the ESPN+, which has doubled its subscriber count in the last five months to stand at 2 million paid subscribers, as well as its theme parks businesses.

The company’s CEO reiterated that Disney’s foray into online streaming services amid growing competition from streaming giants like Netflix (NFLX) remains their top priority, as they will continue to strengthen their direct-to-customers offerings.

The number of consumers preferring streaming services at a cheap cost to traditional cable packages is increasing. Disney must have figured that this is the entertainment future and so besides ESPN+, it has also planned the launch of Disney+ later in 2019 that will stream its movies and original programming.

But direct-to-customers offerings are risky, as profit is hard to churn due the indispensable high content and technology of the service, which will come at a steep cost, but still needs to be sold cheaper than cable networks. In fact, Disney expects that these investments may negatively impact the segment's y-o-y operating income by $200 million in the second quarter.

On a brighter side, the company is expecting its pending acquisition of $71.3 billion worth assets from Twenty-First Century Fox to augment its own streaming services.