Continued growth in streaming and strong domestic tourism to its theme parks propelled Walt Disney Co.’s fiscal third-quarter earnings, even as its theatrical results dipped, the company said Wednesday.
The Burbank media and entertainment giant reported $23.7 billion in revenue for the three-month period that ended June 28, up 2% compared with the same quarter a year earlier. Earnings before taxes totaled $3.2 billion, 4% higher than a year ago. Earnings per share were $2.92, up from $1.43 last year.
Disney beat analysts’ expectations for its earnings, but slightly missed revenue targets. Shares of Disney were down 2.6%, or $3.13, to $115.28 late Wednesday morning.
“Disney operates in a league of its own with a robust portfolio of growth businesses that work seamlessly together to generate value, supported by a deep library of beloved [intellectual property] and enabled with cutting-edge technology,” company Chief Executive Bob Iger said during a Wednesday morning call with analysts. “With ambitious plans ahead for all of our businesses, we’re not done building, and we remain optimistic about the company’s trajectory.”
The company’s entertainment division — which includes its studios, Disney+, Hulu and linear television business — reported $10.7 billion in revenue, 1% higher than a year earlier. Its operating income totaled $1 billion, down 15% compared with the previous year. That reflected losses in linear TV and and weaker theatrical results
during the quarter, when it released Disney and Pixar’s original animated film “Elio,” which struggled at the box office, as well as Marvel Studios’ “Thunderbolts*,” which received strong critical reviews but had a middling commercial performance.
The earnings only captured part of the theatrical results for the live-action adaptation of “Lilo & Stitch,” which would go on to gross $1 billion in global box office revenue. The quarterly earnings were also negatively affected by the comparison to last year’s “Inside Out 2” box office performance, which eventually made almost $1.7 billion globally.
Disney’s linear networks, including ABC and the Disney Channel, continued to struggle, reporting revenue of $2.3 billion, down 15% compared with last year. Operating income fell 28% to $697 million. Part of that decline was due to the lower international results stemming from the company’s Star India merger.
Still, Disney’s streaming business saw gains during the quarter, posting a 6% increase in revenue to $6.2 billion and operating income of $346 million, compared with a loss of $19 million a year earlier.
The company also said it will fully integrate Hulu into the Disney+ streaming app, which is intended to reduce subscriber churn, allowing its sales department to package advertising more effectively. The combination is expected to be completed next year. A Disney representative said Hulu and Disney+ will continue to be offered as standalone subscriptions.
“The way to look at the combination is to start with the consumer,” Iger said. “You’re going to end up with a far better consumer experience when those apps are combined.”
The company now has 183 million Disney+ and Hulu subscriptions.
Citing an “evolved” operating environment, Disney said it will stop reporting its number of streaming subscribers and the average revenue per subscriber, in line with industry rivals such as Netflix.
Theme parks also boosted revenues, despite concerns about a drop-off in international tourism to the U.S. fueled by trade tensions. The experiences division — which includes the Disney theme parks, cruise line and Aulani resort and spa in Hawaii — reported revenue of $9.1 billion, up 8% compared with the previous year. Operating income rose 13% to $2.5 billion.
Disney’s sports unit, which includes ESPN, reported revenue of $4.3 billion, down 5%, due to higher programming and production costs for the NBA and college sports rights and the lack of NHL Stanley Cup Finals rights, which Disney has every other year. Operating income jumped 29% to $1 billion.
The company is leaning heavily into sports for its future growth. Its standalone ESPN streaming service will launch on Aug. 21, and Disney said Tuesday that it will acquire NFL Network and certain other media assets owned and controlled by the NFL in exchange for a 10% stake in ESPN.
Disney also said Wednesday that ESPN will be the “exclusive home” for WWE Premium Live Events in a deal valued at about $1.6 billion.
Analysts welcomed the moves.
“I tend to think they’re in a good position,” said Paul Verna, vice president of content at Emarketer. “It’s a very hard thing to navigate, but I think they’re doing it better than their peers.”
