Disney Enters Digital Future With ESPN -- WSJ
February 07 2018 - 3:02AM
Dow Jones News
By Ben Fritz and Imani Moise
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 7, 2018).
Walt Disney Co. will charge $4.99 a month for a new ESPN online
service as it takes it first step into the digital future.
Chief Executive Robert Iger announced the pricing plans for ESPN
Plus Tuesday as the media giant also returned to sales growth after
two quarters of declines. Profitability was tempered, however, as
declines in cable-TV subscribers continued.
Launching new direct-to-consumer digital businesses is Mr.
Iger's top priority in the coming years. It's the reason Disney
paid nearly $2.6 billion for majority control of technology company
BamTech and in December agreed to spend $52.4 billion on key assets
of 21st Century Fox Inc. (Fox and Wall Street Journal publisher
News Corp share common ownership.)
The first such launch will be ESPN Plus. Mr. Iger said on a
conference call with analysts it will be part of a revamped ESPN
app to be released this spring. The app will feature news and other
ad-supported content along with feeds of the ESPN channels for
cable subscribers and additional content -- such as professional
baseball, soccer and hockey games -- for those who pay for ESPN
Plus.
Disney has traditionally produced less content than competitors
and sought to make more from each of its films and cable networks.
But the company will need more content for its new digital
services, including a Disney-branded one launching in late 2019,
and for Hulu, of which it would become majority owner if the Fox
purchase closes, said Mr. Iger. That's a key reason Disney is
buying Fox's film and television studios.
In addition, Disney on Tuesday announced plans to produce a new
Star Wars movie series from David Benioff and D.B. Weiss, creators
of the "Game of Thrones" television show. They will likely arrive
in the 2020s, as will a new Star Wars trilogy in development from
Rian Johnson, director of December's "Star Wars: The Last
Jedi."
Disney is also working on "a few" Star Wars television series
for its subscription video service, said Mr. Iger.
Though Disney is planning substantial investments for ESPN Plus,
Hulu and the new service, Mr. Iger said the company will still
likely produce less content than the prolific Netflix Inc. "We're
not necessarily going to go in the volume direction Netflix has
gone because we have this unique brand proposition," he said,
arguing that Marvel, Star Wars and Disney are uniquely attractive
to consumers.
The fast move to digital services comes as sales in Disney's
television business, its largest, were essentially flat at just
over $6.2 billion in the quarter ended Dec. 30, the first on its
fiscal calendar. Among the reasons were the integration of BamTech
and higher losses at Hulu. Chief Financial Officer Christine
McCarthy said Hulu's losses this fiscal year will be about $250
million higher than the prior year due to investments in content,
including series from Disney and co-owners Fox and Comcast Corp.'s
NBCUniversal.
The segment was helped by a 1% increase in cable network revenue
to $4.5 billion, as contractual payments from cable and satellite
operators grew and content costs fell. The total number of
subscribers to Disney's cable networks was down 3%, however, which
the company said was a slight improvement in the rate of
decline.
Advertising revenue at ESPN, the company's largest cable
network, was down 11%, due in part to the mix of college football
playoff games.
Disney's ABC broadcast business experienced a 3% drop in revenue
to $1.75 billion. Viewership was down, as was political
advertising.
Disney's theme parks business grew most during the quarter, with
revenue up 13% to $5.15 billion and operating income up 21% to
$1.35 billion. Its domestic theme parks continued to perform better
and Disneyland Paris enjoyed its third straight profitable quarter,
the beginnings of a turnaround following Disney's move to take
control of the long-troubled park.
Overall for the quarter, Disney reported a profit of $4.42
billion, or $2.91 a share, up from $2.48 billion, or $1.55 a share,
a year earlier. Revenue rose 3.8% to $15.35 billion.
The quarter was boosted by a $1.6 billion one-time benefit
related to the recently enacted tax law. For the fiscal year, Ms.
McCarthy said Disney's tax rate will be 24.5%, since one quarter
took place before the new law with its 21% rate took effect.
Disney stock closed up 2.6% before financial results were
released and were up 1% in after-hours trading.
Write to Ben Fritz at ben.fritz@wsj.com and Imani Moise at
imani.moise@wsj.com
(END) Dow Jones Newswires
February 07, 2018 02:47 ET (07:47 GMT)
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