Disney earnings: Results show profit, stock falls 2%

Profitable efforts from Disney

Operating income for the entertainment segment, which includes its movie studio and parts of its television wing, nearly tripled to $1.2 billion. (All figures are in U.S. currency.) Disney’s run at the box office continues with Deadpool & Wolverine, giving the company the top two films of the year.

The Walt Disney Co. said Wednesday that its direct-to-consumer business, which includes Disney+ and Hulu, reported a quarterly operating loss of $19 million, which was much smaller than its loss of $505 million a year earlier. Revenue climbed 15% to $5.81 billion. The results were announced a day after Disney said that it will be boosting prices for Disney+, Hulu and ESPN+, starting on Oct. 17. Disney+ and Hulu will each cost $9.99 a month with ads, a $2 increase for each plan. The ad-free version of Disney+ will run $15.99 monthly, a $2 uptick, while Hulu will be $1 more, at $18.99 monthly for the ad-free version. ESPN+, which is only available with ads, will have a monthly cost of $11.99, a $1 increase. (Read: “The best streaming services in Canada: The value of each—plus a few free ones”)

Reaction from investors and executive comments

Disney’s stock was pressured in early trading with some weakness showing in domestic parks, part of its Experiences division that includes six global theme parks, its cruise line, merchandise and video-game licensing. The company cautioned that the moderation in demand it saw at U.S. parks could linger for the next few quarters. It anticipates fourth-quarter Experiences operating income falling by mid single digits compared with the prior-year period due to the domestic parks moderation as well as cyclical softening in China and less people at Disneyland Paris due to the impact the Olympics had on normal consumer travel.

Johnston said during the company’s conference call that the parks have been impacted by lower-income consumers feeling more financial stress, while higher-end consumers are doing a bit more international travel now. Domestic parks and Experiences operating income fell 6%, thought international parks and experiences operating income edged up 2%. Revenue for domestic parks climbed 3% in the third quarter. International parks revenue rose 5%. Disney said that the decline in operating revenue for domestic parks and experiences was because of increased costs driven by inflation, technology spending and new guest offerings.

The company made $254 million in operating income from content sales and licensing helped by the strong performance of “Inside Out 2” in theaters, which is now the highest-grossing animated film of all time, with more than $1.5 billion generated globally.

Disney said Wednesday that the original Inside Out, which came out in 2015, helped drive more than 1.3 million Disney+ sign-ups and generated over 100 million views worldwide since the first Inside Out 2 teaser trailer dropped.

The combined streaming businesses, which includes Disney+, Hulu and ESPN+, achieved profitability for the first time thanks to a strong three months for ESPN+ and a better-than-expected quarterly performance from the direct-to-consumer unit.

CEO Bob Iger and senior executive vice president and CFO, Hugh Johnston said in prepared remarks that ESPN had its most watched third quarter in primetime in a decade among adults age 18 to 49. This was due to strong viewership in several areas, including the NBA finals, WNBA draft and NHL playoffs and Stanley Cup finals.