Disney Shares Drop
Disney shares tumbled 5% in after-market trading Tuesday as the Mouse House missed Wall Street’s third-quarter profit and revenue expectations. Chief Executive Bob Iger said the company’s results were weighed down by its merger with Twenty-First Century Fox despite the fact that the Disney has earned a whopping $8 billion at the box office so far this year.
“Our third-quarter results reflect our efforts to effectively integrate the Twenty-First Century Fox assets to enhance and advance our strategic transformation,” Iger said, adding that costs associated with its upcoming streaming service Disney+ also pulled down results. Disney acquired the entertainment assets of Fox for $71.3 billion earlier this year, a move that gives it a trove of content for Disney+ which launches in November for $6.99 a month.
The company also said on the call that it expects direct-to-consumer losses to rise to $900 million in the fiscal fourth quarter, as it continues to invest in content for Disney+. Iger said Disney hopes to re-imagine popular Fox titles like “Home Alone,” “Night at the Museum,” “Cheaper by the Dozen” and “Diary of a Whimpy Kid” on Disney+.
Cable Networks revenues jumped 24% year-over-year to $4.5 billion during the quarter, while operating income increased 15% to $1.6 billion. The company said the higher operating income was due to the consolidation of Fox’s FX and National Geographic networks, as well as higher advertising revenues at ESPN, driven by two additional NBA finals games. It also noted an increase in programming and production costs, as a result of contractual rate increases for MLB and NBA programming and new rights for boxing and mixed martial arts.
Last month, Disney’s “Avengers: Endgame” became the highest-grossing film of all time, raking in $2.79 billion at the global box office and surpassing previous chart-topper “Avatar’s” record. The success of “Endgame,” as well as other titles like “Captain Marvel,” “The Lion King,” “Toy Story 4” and “Aladdin,” could help Disney earn more than $9 billion at the global box office this year.