DIS Walt Disney Co

By Ezequiel Minaya 

Walt Disney Co. said Tuesday it will launch a pair of video-streaming services in the next two years, ending a distribution deal with Netflix as it responds to the cord-cutting trend pressuring the cable industry.

The company plans to an ESPN video-streaming service early next year and a Disney-brand streaming service in 2019.

In making these moves, Disney said it would pay $1.58 billion for an additional 42% stake in BAMtech LLC, a direct-to-consumer streaming technology and marketing-services company. It already had a 33% stake in BAMtech.

Disney made the announcement amid its latest quarterly report Tuesday that showed troubled sports network ESPN continued to pressure results with revenue for its fiscal third quarter coming in below analysts's expectations.

Operating income in its cable networks segment, which houses ESPN, retreated 23%, weaker than the 21% decline predicted by analysts cited by FactSet. Operating income within the segment contracted for the fourth time in the last five quarters.

Shares in the media and entertainment giant fell 3.1% in after-hours trading to $103.07.

ESPN, one of Disney's cable properties, has been an example of the challenges facing the cable industry amid declining viewership and the overall cord-cutting trend. Earlier this year the network shed some of its most recognizable on-air talent in a round of layoffs.

The sports-network's presence in U.S. pay-TV households has fallen by around 6 percentage points, to 89%, since fiscal 2013, according to MoffettNathanson. The research firm estimates ESPN has lost more than 5 million subscribers from people downgrading to less expensive "skinny" bundles.

The media-network segment, which includes cable and broadcast, posted a 0.7% decline in revenue to $5.87 billion. The segment is responsible for roughly half of the company's operating income and is bigger than its studio and theme-park units.

However, the company's theme-parks unit saw the biggest revenue increase, up 12% to $5.87 billion. The studio entertainment segment saw revenue slide 16%, pressured from the performance of releases that included "Guardians of the Galaxy Vol. 2," "Pirates of the Caribbean: Dead Men Tell No Tales" and "Cars 3" compared with prior-year films like "Captain America: Civil War," "The Jungle Book," and "Finding Dory."

Overall, Walt Disney reported a third-quarter profit of $2.37 billion, or $1.51 a share, down from $2.60 billion, or $1.59 a share, a year earlier. Excluding certain items, adjusted earnings were $1.58, down from $1.62 a year ago.

Revenue sagged 0.3% to $14.24 billion.

Analysts surveyed by Thomson Reuters had expected adjusted earnings of $1.55 a share on revenue of $14.42 billion.

Traditional pay-TV distributors lost an estimated 941,000 subscribers in the period between April and June, the worst quarterly loss ever, according to MoffettNathanson. The period is always rough for the cable industry as college campus shut down for the summer, among other seasonal factors.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com

(END) Dow Jones Newswires

August 08, 2017 17:17 ET (21:17 GMT)

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