Despite record-breaking box office performances from titles like “The Incredibles 2” and “Avengers: Infinity War,” Disney’s third-quarter earnings missed analyst projections, the company announced on Tuesday, reporting earnings of $1.87 per share.
The consensus had been earnings of $1.95 per share. Similarly, the Burbank-based studio also missed estimates on revenue: $15.23 billion compared with forecasts of $15.34 billion.
Disney, which recently won a bidding war for 21st Century Fox assets, saw uneven growth across its main divisions. While its studio entertainment unit saw revenue increase 20% to nearly $3 billion, the company wrote off two unreleased animated features from its now-shuttered Disneytoon Studios. “Avengers: Infinity Wars” and “The Incredibles 2” set records — the former for the best opening weekend of all time and the latter for highest-grossing animated feature.
Disney’s consumer products and interactive media division saw revenue dip 8% to $1 billion. Disney parks and resorts reported yet another strong quarter, with revenue increasing 6% to $5.2 billion.
“We’re pleased with our results in the quarter, including a double-digit increase in earnings per share, and excited about the opportunities ahead for continued growth,” Disney CEO and chairman Bob Iger said in a statement. “Having earned the overwhelming support of shareholders, we are more enthusiastic about the 21st Century Fox acquisition than ever, and confident in our ability to fully leverage these assets along with our own incredible brands, franchises, and businesses to drive significant value across the entire company.”
During an earnings call with analyst, much of the discussion focused on the pending acquisition, as well as Disney’s plans to launch a streaming service intended to rival Netflix. Iger said Disney, which will have a much smaller library of content compared with Netflix, will focus on quality to make up for the lack of volume. The streaming service will feature titles from Disney, Pixar, Marvel, Lucasfilm and, eventually, National Geographic, once the 21st Century Fox acquisition is finalized.
“We have the luxury of programming this product with programs from (Disney) brands… or derived from those brands, which obviously creates a demand and gives us the ability to not be in the volume, but be in the quality game,” Iger said.
Iger said the service will be priced to reflect the slimmer offerings, but said he is confident with what the company is preparing to launch. “The cupboards are not going to be bare,” he said.
In response to a question about whether the new streaming service will feature some of the older “Star Wars” titles that Disney had sold TV rights to, Iger largely deflected and noted that going forward, new studio releases will not be encumbered by licensing agreements. Turner Broadcasting, which has TV and streaming rights to some of those titles, purchased the rights in 2016 and that agreement expires in 2024. It will take time for those rights to revert back to us,” Iger said.
Regarding 21st Century Fox, Iger pledged to give networks like FX and National Geographic additional resources. Fox Searchlight, which received 20 Academy Award nominations last year and won best picture for “The Shape of Water,” will also be given additional resources, Iger said. “It’s hard to argue that Searchlight needs help from anyone,” he said.
Disney stock dipped 2% in after-hour trading, falling to $114.31.