Walt Disney raises profit outlook as it cuts reliance on legacy TV
Disney said on Wednesday that it would add 10 million Disney+ and Hulu subscribers in the current quarter, most of them from an expanded partnership with the cable operator Charter.
In the third quarter, Disney+ and Hulu subscriptions increased by 2.6 million to 183 million, powering a 6 per cent increase in revenue at the direct-to-consumer business. The unit posted an operating profit of $346 million, compared with a loss of $19 million a year ago.
The company said it expected to generate $1.3 billion of operating profit from its direct-to-consumer streaming business in the fiscal year that ends in September, up from an earlier forecast of $1 billion.
Disney's parks division reported a 13 per cent gain in operating profit to $2.5 billion for the three months to June 28. Profit at domestic parks rose 22 per cent, despite new competition in Orlando, Florida, from Universal's Epic Universe, which opened in late May, as visitors increased their spending.
Walt Disney World in Orlando posted record revenue for the quarter, Hugh Johnston, Disney's chief financial officer, said. Disney expects operating income from the division that includes theme parks, cruise ships and consumer products to increase by 8 per cent in the fiscal year, which is at the top end of previous guidance.
Operating profit in the entertainment division in the third quarter fell 15 per cent to $1 billion. Disney attributed the drop to lower results from traditional television networks and the strong performance of the film Inside Out 2 a year earlier.
At the sports unit, operating profit rose 29 per cent to $1 billion. Domestic ESPN profit fell 3 per cent, partly from higher programming and production costs, including rate increases for NBA games and college sports.
Overall quarterly net profit more than doubled to $5.9 billion, from $2.8 billion a year earlier, after revenues increased 2 per cent year-on-year to $23.7 billion.
The media and entertainment company has been making a push into streaming, with investments in its sports franchise ESPN and Hulu, as traditional TV viewing declines. It is also expanding its popular theme parks and cruise lines.
'With ambitious plans ahead for all our businesses, we're not done building, and we are excited for Disney's future,' Bob Iger, chief executive, said.
Disney said it had entered two major deals with the National Football League and WWE as it readies its $29.99-per-month ESPN streaming service that will give viewers access to sporting events, including the NFL and National Basketball Association.
The WWE deal will bring exclusive rights to big wrestling events, including WrestleMania and Royal Rumble to the streaming service, set to launch on August 21.
Iger said the launch of the ESPN app and the NFL deal, along with a coming integration of Hulu into Disney+, would create 'a truly differentiated streaming proposition'.
The NFL will take a 10 per cent equity stake in Disney's ESPN sports network. The deal values were not disclosed.
Shares of Disney fell $3.96, or 3.4 per cent, to $114.36 in morning trading in New York.
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