The Walt Disney Company on Thursday reported lackluster fourth-quarter earnings, dragged down by weaknesses in its film studio and media networks division, including further ESPN subscriber losses.
Disney missed analyst expectations of $1.12 per share, reporting instead earnings of $1.07 per share. The company reported revenue of $12.8 billion, down 3% from the previous year’s quarter.
The company’s media networks — which include cable and broadcast TV — saw revenues slide 3% to $5.5 billion and segment operating income declined 12% to $1.5 billion. ESPN, which has struggled in recent quarters as consumers turn away from cable TV packages, again saw subscriber losses.
To counter competitors like Netflix, Disney has aggressively moved to launch its own direct-to-consumer service, starting with ESPN Plus, a sports streaming service launching next year. The company announced the name Thursday.
In 2019, Disney will launch a Disney-branded streaming service for its films and television shows. The Mouse House will eventually pull its Disney, Pixar, and Lucasfilm titles from Netflix. Iger said the subscription cost for its streaming service will be “substantially below” what Netflix charges, mostly because the streaming service will also have less content.
In addition to its current library, the streamer will also include original films and TV series. The company announced that it has closed a deal with director Rian Johnson to develop a new “Star Wars” trilogy. Disney is also planning a live-action “Star Wars” TV series to air on its entertainment streaming service, expected to launch by the end of 2019. In addition to the “Star Wars” TV series, Disney is working on TV series adaptations of Pixar’s “Monsters Inc.,” the Disney Channel’s “High School Musical” franchise, and an original entry from Marvel.
“We look forward to launching our first direct-to-consumer streaming service in the new year, and we will continue to invest for the future and take the smart risks required to deliver shareholder value,” Iger said in a statement.
The earnings report comes as Disney is said to be considering acquiring some of Fox’s entertainment assets. Iger declined to comment on the speculation.
Disney has dominated the box office in recent years, delivering hits from Pixar, Marvel, and Lucasfilm, which it acquired in 2006, 2009, and 2012, respectively. Responding to a question on whether Disney plans to continue its dominance through other acquisitions, Iger said Disney does not “feel right now that we have a great need to add to the film slate that we have.”
On the film studio side, the quarterly decline was attributed to a lighter release schedule this year and the under-performance of “Cars 3” compared with “Finding Dory” in the same quarter last year. Disney’s major films — “Thor: Ragnarok,” “Coco,” and “Star Wars: The Last Jedi” — are coming late in the year, with “Thor” having just debuted last week.
Parks and resorts delivered some good news for the company. Revenues for the quarter increased 6% to $4.7 billion, despite the closure of domestic theme parks and cruise cancellations due to Hurricane Irma. Walt Disney World Resort closed for two days, three cruises were canceled, and two others were shortened.
Disney stock initially tumbled 3% in after-hours trading Thursday, after closing at $102.68.