Disney Reports Mixed Earnings and a Full Project Pipeline
LOS ANGELES — “Pardon our pixie dust.”Posted — Updated
LOS ANGELES — “Pardon our pixie dust.”
When the Walt Disney Co. undertakes construction projects at its theme parks, it displays signs with that message as a promise of the magic to come.
The same request essentially hangs on Disney as a corporation at the moment. As Silicon Valley giants move deeper into Hollywood and the traditional television business unravels, Disney is trying to reinvent itself — buying most of 21st Century Fox, building two streaming services, pouring billions into theme park expansions focused on its “Star Wars” franchise — in pursuit of a new growth trajectory. But things may get a little messy in the meantime.
Disney reported mixed quarterly earnings Tuesday as losses associated with the development of the planned streaming services — the first of which, arriving in the spring, will involve ESPN and cost $4.99 a month — hurt Disney’s cable television division, where operating income fell 1 percent to $858 million. Disney’s movie studio also reported weaker results, as did the company’s consumer products business.
On the bright side, operating income increased 21 percent, to $1.35 billion, at Walt Disney Parks and Resorts because of higher attendance and ticket prices at Walt Disney World in Florida and Disneyland Paris, among other properties. (Disney is expected in the coming week to increase ticket prices again, particularly for peak vacation times, as a way to spread out attendance.) Disney Cruise Line also had a strong quarter.
Analysts, however, were focused on Disney’s various growth plans during a post-earnings conference call, peppering Robert A. Iger, Disney’s chief executive, with questions about the company’s $52.4 billion offer for 21st Century Fox assets last month. He had few specific answers.
“We don’t really have any update on the regulatory front,” Iger said, adding that he intends to be “patient” as antitrust officials scrutinize the acquisition. Iger did say that he had met with several Fox executives in recent weeks, “gaining insight that will be invaluable when it comes to integrating our organizations.”
When the conversation turned to ESPN Plus, Disney’s sports streaming service, Iger emphasized that users would be able to personalize their experience. ESPN Plus will exist inside the ESPN app, which is being rebuilt.
“The changes will be dramatic,” Iger said. He made no mention about the future management of ESPN, which has been operating under temporary leadership after the surprise resignation of John Skipper, who stepped down as president last month, citing substance addiction.
Iger also focused on Disney’s film pipeline, announcing that David Benioff and D.B. Weiss, executive producers of HBO’s hit series “Game of Thrones,” would write and produce a series of new “Star Wars” movies. For the first time, Iger noted, Disney will release three Marvel movies in a single year, starting with “Black Panther,” which is poised for a blockbuster arrival Feb. 16, followed by “Avengers: Infinity War” in May and “Ant-Man and the Wasp” in July.
For its first fiscal quarter, which ended Dec. 30, Disney had net income of $4.42 billion, or $2.91 a share, compared with $2.48 billion, or $1.55 a share, a year earlier. Most of the increase was attributable to a $1.6 billion one-time tax benefit associated with the rewrite of the federal tax code. Excluding the tax benefit, Disney had per-share results for the quarter of $1.89. Revenue totaled $15.35 billion, a 4 percent increase.
Analysts had predicted per-share profit of $1.61 and revenue of $15.45 billion. Disney shares increased about 3 percent in after-hours trading.
The company’s vast television division, Disney Media Networks, has been buffeted by subscriber declines at ESPN, a problem that continued during the quarter as more people cut cable and relied on streaming services like Hulu, Netflix and Amazon Prime. Advertising revenue at ESPN also dropped; Disney cited a timing shift in college football playoff games as one reason. Lackluster ratings at Disney-owned ABC also caused headaches for Disney Media Networks, which reported a 12 percent decline in operating income, to $1.19 billion.
Disney’s movie studio had operating income of $829 million, down 2 percent from a year earlier. Box office successes in the quarter included “Thor: Ragnarok,” which collected $852.7 million worldwide (26 percent more than “Doctor Strange” took in a year earlier). But Walt Disney Studios suffered from weaker home entertainment results — “Cars 3” did not sell as well on DVD as “Finding Dory” did a year earlier.
The company’s smallest division, Disney Consumer Products and Interactive Media, which is run by James Pitaro, who is considered a candidate to lead ESPN, reported a 4 percent decline in operating income. Revenue related to video games increased, Disney said, but not enough to offset setbacks including lower licensing revenue from merchandise based on “Frozen.”
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