Walt Disney Co.’s (DIS.N) quest to become a digital-streaming giant will be an expensive endeavor, but the company can handle it.
That’s the message of its latest earnings report, which exceeded Wall Street estimates and sent the shares up as much as 2.4 per cent in late trading.
Though profit fell 13 per cent in the fiscal second quarter, that was better than what analysts predicted. Sales also topped estimates in the period, which ended in March.
The company is launching Disney+ on Nov. 12, marking its biggest strategy shift in decades. The US$6.99-a-month streaming platform will compete with Netflix Inc. as a direct-to-consumer product, aiming to lure families with its Marvel, Pixar and Star Wars content. “Avengers: Endgame,” which hit theaters last month and is now the second-highest-grossing film of all time, will stream on Disney+ on Dec. 11.
“The positive response to our direct-to-consumer strategy has been gratifying,” Chief Executive Officer Bob Iger said in a statement. Disney’s $71 billion acquisition of 21st Century Fox Inc.’s entertainment assets also is helping the effort, he said.
‘Black Panther’
Disney battled some tough comparisons in the quarter. Its movie studio released “Black Panther” -- the biggest domestic hit of 2018 -- in theaters during the year-earlier period.
Income at Disney’s most-profitable business, cable TV, rose 1.6 per cent to US$1.76 billion in the quarter, buoyed by rising fees charged to cable distributors, particularly for ESPN. But profit at the ABC network fell, hurt by lower sales of advertising and TV programs.
Theme-park earnings continued to rise, climbing 15 per cent to US$1.51 billion, while the company’s nascent direct-to-consumer streaming division lost US$393 million.
Disney shares rose as high as US$134.99 in after-hours trading. They were already up 23 per cent this year, bolstered by optimism about the Burbank, California-based company’s new streaming services. It outlined plans for Disney+ and its other subscription services during an April investor conference.
Disney unveiled its slate of new films going out until 2027 this week. It delayed “Avatar 2” by one year to 2021, hurting next year’s lineup. But the company also announced plans for three new “Star Wars” films starting in 2022.
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