How Disney Is Breaking Into Online Streaming

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Walt Disney Co. (NYSE: DIS) reported its most recent earnings results after markets closed Tuesday. The Mouse House said that it had $1.58 in earnings per share (EPS) and $14.23 billion in revenue, compared with consensus estimates from Thomson Reuters called for $1.55 in EPS and $14.42 billion in revenue. In the fiscal third quarter from last year, Disney posted EPS of $1.62 and $14.28 billion in revenue.

In terms of its segments, Disney reported:

  • Media Networks revenues for the quarter decreased 1% to $5.9 billion and segment operating income decreased 22% to $1.8 billion.
  • Parks and Resorts revenues for the quarter increased 12% to $4.9 billion and segment operating income increased 18% to $1,168 million.
  • Studio Entertainment revenues for the quarter decreased 16% to $2.4 billion and segment operating income decreased 17% to $639 million.
  • Consumer Products & Interactive Media revenues for the quarter decreased 5% to $1.1 billion and segment operating income increased 12% to $362 million.

Separate from earnings, Disney announced that it has agreed to acquire majority ownership of BAMTech, and will launch its ESPN-branded multi-sport video streaming service in early 2018, followed by a new Disney-branded direct-to-consumer streaming service in 2019.

Under terms of the deal, Disney will pay $1.58 billion to acquire an additional 42% stake in BAMTech from MLBAM, the interactive media and Internet company of Major League Baseball. Disney had previously acquired a 33% stake in BAMTech under an agreement that included an option to acquire a majority stake over several years, and today’s announcement marks an acceleration of that timetable for controlling ownership.

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Robert A. Iger, Chairman and CEO of Disney, commented:

Today we announced a strategic shift in the way we distribute our content. The media landscape is increasingly defined by direct relationships between content creators and consumers, and our control of BAMTech’s full array of innovative technology will give us the power to forge those connections, along with the flexibility to quickly adapt to shifts in the market. This acquisition and the launch of our direct-to-consumer services mark an entirely new growth strategy for the Company, one that takes advantage of the incredible opportunity that changing technology provides us to leverage the strength of our great brands.

Shares of the Mouse House closed Tuesday at $107.00, with a consensus analyst price target of $117.11 and a 52-week range of $90.32 to $116.10. Following the release of the earnings report, the stock was initially down 3% at $103.73 in the after-hours trading session.

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