Disney drops Fox assets in new streaming bundle

The Walt Disney Company will offer a bundle package of three streaming services including Disney+, Hulu and ESPN+ for $12.99, the company confirmed yesterday.

Speaking during an earnings call with investors, chief executive Bob Iger disclosed that Disney was in conversation with Apple, Amazon and Google to distribute Disney+.

He said: “We think it is important to achieve scale relatively quickly and they’ll be an important part of that.”

Disney film studios revenues climbed 33% and its TV was up business 21%, but the company’s total costs climbed to $17.5 billion - up 55% from the same time last year.

Its direct-to-consumer (D2C) business unit posted an operating loss of $553 million due to associated costs with its upcoming launch of Disney+ streaming service. Disney shares fell 4% in after-hour trade after Iger’s earnings call.

Iger pointed to the company investment in technology and content in a move to position its streaming service to effectively take on Netflix; a project that Iger described as “the most important product that the company has launched” during his two-decade tenure.

“Nothing is more important to us than getting this right,” he said.

All Disney films released in 2019 will be available on Disney+ as soon as their theatrical and home entertainment windows have closed and Frozen 2 will also be made exclusively available on the platform by the summer of 2020.

Disney+ on its own will cost users $6.99 a month, or $69.99 for a full year.

The shift in the Mouse House’s business strategy comes after its income statement was lower than expected with the firm citing competition from Netflix, its investment in its streaming service Disney+, disappointing attendance at its theme parks and the acquisition of Fox film studios in March as contributing factors.

Commenting on the results, PP Foresight tech, media and telco analyst Paolo Pescatore said: “Initially, it seems that Disney is looking for scale but will need to increase revenue to recoup the significant investment.

“Consumers have some tough decisions ahead as they can’t sign up to all the streaming services.”

Disney acquired 21^st Century Fox for cash and the issuance of 307 million shares on 20 March this year.

• Read more: Disney completes $71.3bn Fox acquisition

While, its Cable Networks revenues for the quarter increased 24% to $4.5 billion and operating income increase 15% to $1.6 billion.

The firm attributed the rise to higher operating income due to the consolidation of 21 Century Fox businesses (primarily the FX and National Geographic networks) and an increase at ESPN, partially offset by a decrease at Freeform.

Studio Entertainment revenues for the quarter increased 33% to $3.8 billion and segment operating income increased 13% to $792 million.

These improvements were partially offset by a loss from the 21CF businesses and lower TV, streaming video on-demand and home entertainment distribution results at our legacy operations.

The increase in theatrical distribution results was due to the performance of Avengers: Endgame, Aladdin, Captain Marvel and Toy Story 4 in the current quarter compared to Avengers: Infinity War, Incredibles 2, Black Panther and Solo: A Star Wars Story in the prior-year quarter.

Iger said: “Our third-quarter results reflect our efforts to effectively integrate the 21st Century Fox assets to enhance and advance our strategic transformation.

“I’d like to congratulate The Walt Disney Studios for reaching $8 billion at the global box office so far this year –a new industry record– thanks to the stellar performance of our Marvel, Pixar and Disney films.

“The incredible popularity of Disney’s brands and franchises positions us well as we launch Disney+, and the addition of original and library content from Fox will only further strengthen our direct-to-consumer offerings.”

• Read more: Disney’s direct-to-consumer manoeuvre