Walt Disney Co. reported fourth-quarter earnings that topped Wall Street expectations, capping a year of dramatic change for the company ahead of the launch of its all-important new streaming service.
The Burbank entertainment company posted profit of $1.07 a share for the three months that ended in September. While that was down 28% from the same period of time a year ago, the results exceeded the 94 cents a share analysts were expecting. Revenue for the quarter grew 34% to $19.1 billion, slightly missing analysts' estimates of $19.18 billion.
The drop in profits came as Disney and its Chairman and Chief Executive Bob Iger is making a bold and expensive play to reshape its business for the streaming future. Disney is making a substantial investment to grow its direct-to-consumer business with Disney+, which is set to launch with on Tuesday in a bid to take on players like Netflix and remain dominant in the entertainment industry as others, including AT&T and Apple, debut their own offerings. The company also took operational control of money-losing Hulu this year, which has weighed on profits.
Executives have been clear that the investments in streaming and the acquisition of Fox are not about short-term profits, but rather about positioning Disney for continued success in the fast-changing entertainment business.
"We've spent the last few years completely transforming The Walt Disney Company to focus the resources and immense creativity across the entire company on delivering an extraordinary direct-to-consumer experience, and we're excited for the launch of Disney+ on November 12," Iger said in a statement.
Results were boosted by a big quarter from Disney's film studio business, which had big hits including "The Lion King," "Aladdin" and "Toy Story 4" in the quarter. The studio delivered operating profit that soared 79% to $1.08 billion on revenues of $3.3 billion.
Disney's parks and consumer products business made $1.4 billion in operating income, up 17% from the prior year thanks to bigger sales of merchandise revenue, higher spending by guests and ticket prices at Disneyland Resort in Anaheim.
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The company's media networks division lagged, with profit decreasing 3% to $1.8 billion. Income fell because of a decrease at cable network ESPN, lower program sales from ABC Studios and higher programming costs at the ABC television network.
The direct-to-consumer unit, which includes Disney+, ESPN+ and Hulu, was a drag on profits as Disney escalated investment. The division lost $740 million, compared to a loss of $340 million a year ago. The company is projected to invest $1 billion on content in fiscal 2020, which began in October.
High spending on streaming is necessary to make a success out of Disney+, which will charge $6.99 a month for subscribers, or $70 for those who sign up for a full year. The heavily marketed streaming platform included an enviable vault of animated and live action Disney classics, Marvel movies, the "Star Wars" pictures, Pixar films, and a robust slate of original titles, including the "Star Wars" series "The Mandalorian."
Disney expects the service to be profitable by fiscal 2024, and amass 60 million to 90 million subscribers worldwide.
The company also reported full fiscal year earnings. Net income totaled $10.4 billion, down 17% from fiscal 2018. Sales increased 17% to $69.57 billion.
Results reflected a year during which Disney closed its $71.3-billion acquisition of 21st Century Fox's assets, followed by a difficult ongoing effort to integrate the Fox businesses, some of which, especially feature films, have underperformed.
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