Disney's earnings suggest that streaming may eventually replace traditional TV viewing habits.

• In an interview, CFO Hugh Johnston stated that streaming will generate enough operating income for Disney in fiscal 2025 to offset the decline in operating income from linear TV.
• Disney expects to see an increase of approximately $875 million in operating income from direct-to-consumer entertainment next year compared to fiscal year 2024.
• Some investors previously believed that streaming was not as robust a business as Disney's results suggest.

might be proving the world's most famous investor wrong.

Last year, Warren Buffett, known as "The Oracle of Omaha," expressed to CNBC's Becky Quick that he lacked confidence in the streaming video industry.

"Buffett stated on April 12, 2023 that streaming is not a profitable business, and the shareholders have not performed well over time."

Since January 1, 2022, legacy media companies such as NBCUniversal and have underperformed the S&P 500, mainly because of the billions of dollars they lost while launching subscription streaming services.

Disney's quarterly earnings results, released on Thursday, suggest that streaming is set to become a more lucrative venture.

According to Disney Chief Financial Officer Hugh Johnston, streaming has become an even more profitable business than traditional TV due to a combination of decreasing content spending and increasing subscribers on Disney+, Hulu, and ESPN+.

Johnston stated in an interview that Disney's streaming will generate enough operating income in fiscal 2025 to counterbalance the decline in operating income from linear TV.

The Disney direct-to-consumer operating income is expected to increase by approximately $875 million in the next fiscal year, surpassing $1 billion in operating income for the upcoming fiscal year.

Johnston stated during Disney's earnings conference call that the company is well-positioned if consumers choose to remain in linear TV for an extended period, as well as if they decide to switch to streaming.

Disney's entertainment streaming platforms (Disney+ and Hulu) made $143 million in operating income in the fiscal fourth quarter, compared to a loss of $2.5 billion in the same period last year.

Streaming strikes back

The bearishness toward traditional media extends beyond streaming's short-term financial struggles.

The notion that subscription streaming video will not replace the substantial profits from linear TV (cable and broadcast) that companies have relied on for decades has been widely accepted by investors.

The pay-TV industry has been successful due to several factors, but two notable reasons are that media companies receive monthly payments regardless of viewership and traditional churn rates were low until the advent of streaming. Over the past ten years, millions of Americans have canceled their cable TV subscriptions.

In the new streaming era, it's much simpler to cancel a specific service whenever desired. Rather than having to cancel all TV entertainment, a consumer can selectively choose from a variety of streaming services each month.

As a result of the shift in consumer behavior, media companies no longer receive regular payments. Instead, viewers pay only for the specific programming they want and for as long as they need it. Despite this, Disney's projections suggest that streaming may still be successful in the long run as a replacement for cable. To mitigate churn, future bundles or consolidations may be considered. As companies move their top content to streaming, canceling services becomes less attractive.

Disney shares surged over 6% in midday trading, indicating that the media industry may emerge from a challenging period with more strength than investors initially anticipated.

Disclosure: Comcast's NBCUniversal is the parent company of CNBC.