Disney misses profit targets but says exodus from TV is slowing
Disney is planning its own streaming site, though smaller than Netflix, and will gain new entertainment content from its purchase of parts of 21st Century Fox
Bengaluru/Los Angeles — Walt Disney missed Wall Street profit targets as new technology costs rose during the quarter ended June 30, but CEO Bob Iger said an exodus of consumers from its TV channels was slowing.
Shares of Disney, which have climbed nearly 9% so far this year, slipped 1.1% in after-hours trading on Tuesday to $115.45.
Disney is trying to transform itself into a broad-based digital entertainment company as ESPN and its other networks lose viewers to Netflix and other streaming options. It is on the verge of gaining new film, TV and international properties in a $71bn purchase of assets from 21st Century Fox.
Iger, on a post-earnings webcast, said growth of smaller channel bundles delivered online had helped make up for customers dumping larger cable packages. Disney has seen "noticeable improvement in the rate of [subscriber] loss in each of the last four quarters," he said.
The company plans to launch its own streaming service for family entertainment in late 2019. The service will not, however, carry the volume of content found on Netflix, Iger added. The cost to build streaming services contributed to a profit decline at Disney’s media networks, the company’s largest unit, in the quarter. Operating income at the division dropped 1% to $1.8bn, the company said.
Subscription growth for ESPN+, a pay streaming service launched in April, is "exceeding our expectations", Iger said. Overall, Disney posted earnings of $1.87 a share excluding certain items, an increase from a year earlier, but below Wall Street’s average forecast of $1.95, according to Thomson Reuters.
Disney’s movie studio enjoyed blockbuster success with "Avengers: Infinity War" and "The Incredibles 2". Operating income at the studio rose 11% to $708m, but it also recorded a $100m film impairment charge, primarily related to work on two animated films it decided not to release.
The company’s theme parks division reported a 15% rise in profit to $1.3bn with increases at domestic and international resorts. In consumer products, operating income declined 10% to $324m.
Net income attributable to Disney rose to $2.92bn, or $1.95 a share, in the quarter, compared with $2.37bn, or $1.51 a share, a year ago. Total revenue rose 7% to $15.23bn, but missed analysts’ average forecast of $15.34bn.