Walt Disney beats by $0.03, misses on revs; acquires majority of BAMTech for $1.58 bln; will launch ESPN brand video streaming service early next year and Disney brand DTC service in 2019; will end distribution agreement with Netflix (NFLX) in 2019 (106.98 +0.63)
- Reports Q3 (Jun) earnings of $1.58 per share, $0.03 better than the Capital IQ Consensus of $1.55; revenues fell 0.3% year/year to $14.24 bln vs the $14.44 bln Capital IQ Consensus.
- Q3 Media rev down 1% with operating income down 22% to $1.8 bln. Cable Networks revenues for the quarter decreased 3% to $4.1 billion and operating income decreased 23% to $1.5 billion. Lower operating income was due to a decline at ESPN. The decrease at ESPN was due to higher programming costs, lower advertising revenue and severance and contract termination costs, partially offset by affiliate revenue growth. The programming cost increase was due to a contractual rate increase for NBA programming, partially offset by a decrease in the cost of time for ESPN programming aired on the ABC Television Network. Lower advertising revenue was due to a decrease in average viewership and lower units delivered including the impact of two fewer NBA finals games, partially offset by higher rates. Affiliate revenue growth was due to contractual rate increases, partially offset by a decline in subscribers.
- Parks and Resorts revenues for the quarter increased 12% to $4.9 billion and segment operating income increased 18% to $1,168 million.
- Studio Entertainment revenues for the quarter decreased 16% to $2.4 billion and segment operating income decreased 17% to $639 million.
- Co has agreed to acquire majority ownership of BAMTech, LLC and will launch its ESPN-branded multi-sport video streaming service in early 2018, followed by a new Disney-branded direct-to-consumer streaming service in 2019. Disney will pay $1.58 billion to acquire an additional 42% stake in BAMTech—a global leader in direct-to-consumer streaming technology and marketing services, data analytics, and commerce management—from MLBAM.
- The ESPN-branded multi-sport service will offer a robust array of sports programming, featuring approximately 10,000 live regional, national, and international games and events a year, including Major League Baseball, National Hockey League, Major League Soccer, Grand Slam tennis, and college sports. Individual sport packages will also be available for purchase, including MLB.TV, NHL.TV and MLS Live. The new service will be accessed through an enhanced version of the current ESPN app. In addition to the multi-sport service, the ESPN app will include the news, highlights, and scores that fans enjoy today. Consumers who are pay TV subscribers will also be able to access the ESPN television networks in the same app on an authenticated basis. For many sports fans, this app will become the premier digital destination for all their sports content.
- The new Disney-branded service will become the exclusive home in the U.S. for subscription-video-on-demand viewing of the newest live action and animated movies from Disney and Pixar, beginning with the 2019 theatrical slate, which includes Toy Story 4, the sequel to Frozen, and The Lion King from Disney live-action, along with other highly anticipated movies. Disney will also make a significant investment in an annual slate of original movies, TV shows, short-form content and other Disney-branded exclusives for the service. Additionally, the service will feature a vast collection of library content, including Disney and Pixar movies and Disney Channel, Disney Junior and Disney XD television programming.
- With this strategic shift, Disney will end its distribution agreement with Netflix (NFLX) for subscription streaming of new releases, beginning with the 2019 calendar year theatrical slate.
- "Today we announced a strategic shift in the way we distribute our content. The media landscape is increasingly defined by direct relationships between content creators and consumers, and our control of BAMTech's full array of innovative technology will give us the power to forge those connections, along with the flexibility to quickly adapt to shifts in the market," said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. "This acquisition and the launch of our direct-to-consumer services mark an entirely new growth strategy for the Company, one that takes advantage of the incredible opportunity that changing technology provides us to leverage the strength of our great brands." "Our results for the quarter reflect the underlying strength of our brands and franchises, and our continued investment in high-quality content. Our ability to successfully execute on our core strategy, coupled with our plans for new direct-to-consumer offerings, give us continued confidence in our ability to drive shareholder value."