Disney reported a total revenue growth of seven percent to $15.23 billion in its third-quarter earnings. A major chunk of its earnings came from the international blockbuster movies, particularly Avengers: Infinity War and Incredibles 2, both of which are breaking box office sales records, even after adjusting for pre-release marketing costs.
But it wasn’t all good news. Consumer products and interactive media revenues dropped by eight percent to $1.0 billion and the segment operating income fell by 10 percent to $324 million due to lower income from licenses and retail store sales. However, decreased licensing revenues from the Spider-Man and Cars franchises were partially offset by gains from Avengers-based products.
TV Viewership Declines, But Higher Ad Sales Compensate
Media networks that fall under the Disney umbrella include ESPN, Freeform and ABC, all three of which reported decreased ad revenues due to declining subscribers and viewership numbers. ESPN, which was impacted by having one less NBA Finals game, was able to compensate with higher affiliate revenue growth and other factors.
Even so, revenues from Disney’s cable networks grew by two percent to $4.2 billion, but its operating income decreased 5 percent to $1.4 billion due to losses at Freeform and BAMTech, the latter of which are related to higher content and marketing costs and technology investments.
The company also assured investors that the subscriber decline seems to be slowing. Even though there are fewer traditional TV subscribers compared to last year, there is a marked growth in digital subscriptions.
Disney saw losses with its investments in channels such as A&E and Hulu. Even though Hulu saw higher subscription and advertising revenue, these gains were partially offset by higher programming and labor costs. With this information, Iger announced that the company remains enthusiastic about launching a direct-to-consumer (DTC) media platform to compete with Netflix, Amazon and others by emphasizing its iconic brands over providing a huge volume of content.
“In this year of unprecedented consumer choice, brands matter more than ever,” said Iger. “Our incredible portfolio of high-quality, in-demand branded content uniquely positions us to strategically and successfully navigate this increasingly dynamic marketplace. We’ve always believed we have the brands and content to be extremely competitive and to thrive alongside Netflix, Amazon and anyone else in the market.”
Adding Fox Networks Group
Iger went into detail about its upcoming acquisition of the Fox Networks Group and how the addition of its channels, IPs and brands will impact the company’s upcoming SVOD service plans. He explained that Disney’s growth strategy will be served by adding the international properties Fox currently holds, which include 350 channels that reach 190 countries and licenses such as Avatar, X-Men, Deadpool, Kingsman and many more. That’s not taking into account Fox’s substantial investment in European pay-TV company Sky, which it is seeking to acquire.