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Disney tops earnings estimates, picks up streaming stake
[BENGALURU] Walt Disney Co's quarterly profit and revenue on Tuesday beat analysts' estimates fueled by movie studio hits, and the media company said it was taking a stake in a streaming video technology company to sell more content directly to consumers.
Disney and other media companies are struggling with "cord cutting" consumers who abandon large bundles of channels sold by cable TV providers. In buying a 33 per cent stake in video-streaming BAMTech for US$1 billion, Disney is hoping to lure online viewers. It will begin with an ESPN subscription streaming service by the end of the year.
The service will not, however, include any of the content that appears on ESPN's TV networks, Disney said.
Disney has the option to acquire majority ownership in coming years in BAMTech, which was formed by Major League Baseball (MLB) and is separate from the league's content business.
The technology is lauded as some of the best in the industry and is used by HBO Now and the National Hockey League as well as baseball.
The investment will help "allay investors fears about Disney's relevance in a world where content is delivered online," Pivotal Research Group analyst Brian Wieser said.
"That said, I think it doesn't do anything specifically to allay fears of unbundling" of cable networks," he said.
Disney's movie and theme parks divisions topped expectations in the quarter, although a rise in cable networks revenue and operating profit was slightly below Wall Street targets, according to FactSet StreetAccount. Shares of Disney fell about 2 per cent in extended trade.
Revenue at Disney's cable networks business rose 1.4 per cent to US$4.20 billion in the third quarter ended July 2, but missed an analyst consensus of US$4.31 billion.
ESPN - the company's cash cow - drove the increase in cable networks operating income due to affiliate and advertising revenue growth, although the number of subscribers fell and programming costs rose.
The Jungle Book and Captain America: Civil War fuelled gains at the movie studio, with revenue increasing 39.6 per cent to US$2.85 billion. Operating income rose 62 per cent to US$766 million.
Revenue at its theme park and resorts business was up 6 per cent to US$4.38 billion.
The net income attributable to the company rose to US$2.6 billion, or US$1.59 per share, in the third quarter, from US$2.48 billion, or US$1.45 per share, a year earlier.
Revenue rose to US$14.28 billion from US$13.10 billion.
Excluding items, the company earned US$1.62 per share.
Analysts on average had expected a profit of US$1.61 per share and revenue of US$14.15 billion.
Disney's shares fell to US$94.92 in extended trade on Tuesday, down from a close of US$96.67.