Disney (DIS) is investing big in its park business. The entertainment giant announced it will invest $60 billion into its parks and cruise business over the next 10 years. Third Bridge Group Sector Analyst Jamie Lumley says the company is in a "period of transition" as it tackles an unprofitable streaming business, a linear business that's under pressure, and concerns about the impact of price hikes at the parks. Lumley argues that given the uncertainty surrounding the streaming and linear businesses, Disney is choosing to "bolster" a business that tends to be more reliably profitable.

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Video Transcript

- And Disney will nearly double its investment into its theme parks and cruises over the next decade. The company saying, now plans on investing approximately $60 billion in the business. Theme parks have shown signs of growth at Disney, while its streaming business continues to slow. Shares not loving the news, closing the day in the red. For more, let's bring in Jamie Lumley, Third Bridge Group sector analyst. Jamie, so investors, they saw this headline, they weren't impressed. What did you think about this news.

JAMIE LUMLEY: There's definitely a lot to unpack in today's news, and thanks for having me on today. I think what we have been hearing over the last year about Disney is just how much this company is in a period of transition. And if you look at the major headlines over the past few months, you can definitely see that.

The streaming business is still not profitable. The linear business is under a lot of pressure. The parks, while seeing some strong international growth, are also not seeing the same foot traffic in the US, and there are a number of concerns about the effect that price hikes have had.

So if we look at what Disney is doing today, it's exploring some major transformation initiatives in the linear business, potential asset sales for ABC, strategic partnerships for ESPN. And for the parks business, Bob Iger is really thinking about right now how do we improve this, how do we strengthen this. Yes, the prices have been going up, but if consumers start to see more value in the parks business, in these experiences, can this be an even bigger growth driver for the company going forward.

- Yeah, Jamie, how do we see the two? How do we connect the two here. I mean, you're talking streaming, the losses there. As you point out, there's a lot to be hashed out in terms of a shakedown on the assets Disney owns. The announcement we got today, is that a result of that? Seeing the losses on that side saying, look, our parks business, even if it's slowing down, has been the big revenue driver. Let's double down on that.

JAMIE LUMLEY: So if we look at these different business units, I think the overall uncertainty on really whether or not streaming and the traditional linear ecosystem can be, in this transition, to be successful and eventually be a big profit driver for the company, the significance in that uncertainty is making management think, OK, we know that the parks business has historically been profitable, it's still profitable, parks and experiences are driving twice as much operating income as the entertainment division, even though the revenue totals are quite different.

Looking at bolstering up that business wealth there's all that uncertainty, is probably top of mind. As we think about looking over at streaming, while there is a lot of excitement about what this can be, we've been hearing from experts that the profitability target of 2024 might not be realistic. It might take another 12 to 18 months beyond that to really see it become profitable.

So really bolstering this other side could bring some stability and balance in this business, which is seeing a lot of different pieces moving, and they're trying to find what is the new strategy, to have the traditional Disney flywheel of creating best in class content, content for the family, and then having it be engaged with on a variety of different platforms to ultimately drive success for the business.