Disney pulls back the curtain on its streaming service — a little bit — announcing new 'Star Wars' and Marvel shows

Nov. 8, 2018 3:45 PM PT

Walt Disney Co. posted strong fourth-quarter earnings, again bolstered by its juggernaut film studio business.

But Chief Executive Bob Iger, in a Thursday call with analysts, focused attention on the company’s much-anticipated, yet-to-launch streaming service, a crucial initiative to ensure that Burbank-based Disney remains a dominant force in the entertainment industry’s digital future.

Rather than tout box office successes such as Pixar’s “Incredibles 2,” Iger pulled back the curtain — ever so slightly — on the upcoming service that is expected to launch late next year. The direct-to-consumer offering, now dubbed Disney+, will compete with Netflix, Amazon Prime Video and in-the-works offerings from AT&T’s WarnerMedia and Apple.

Disney+ is part of a larger streaming online strategy for Disney, which also includes the ESPN+ app and Disney’s stake in Hulu. The company’s online ambitions were a major driver of Disney’s pending $71.3-billion acquisition of studio and TV assets from 21st Century Fox Inc., which is expected to close next year.

The numbers

Disney earned net income of $2.3 billion, or $1.48 per share, on revenue of $14.3 billion during the fourth quarter, the company said Thursday. That compared with a profit of $1.07 per share, on revenue of $12.8 billion, during the same quarter a year ago.

Disney’s profits and revenue exceeded expectations of Wall Street analysts, who had estimated earnings of $1.34 a share, on sales of $13.7 billion, in the three months that ended in September.

Studio entertainment continued to drive results. The company’s studio posted operating income of $596 million in the fourth quarter, more than double the prior-year quarter, thanks to hits such as “Incredibles 2” and “Ant-Man and the Wasp.”

Disney’s media networks business, which includes ESPN, grew operating income 4% to $1.5 billion in the quarter. Parks and resorts jumped 11% to $829 million in operating income, while consumer products declined 10% to $337 million.

Disney also disclosed a $157-million impairment charge related to its investment in Vice Media.

For the full fiscal year, Disney generated $59 billion in revenue, up 8% from the prior year. Earnings increased 24% to $7.08 a share.

The takeaway

During the call, Iger not only revealed the Disney+ name for the first time, but also announced new shows for the platform from its Marvel and “Star Wars” brands.

The slate of original content, Iger said, includes a live-action series starring Diego Luna that will take place before the events of “Rogue One: A Star Wars Story” (In other words, a prequel to a prequel). Marvel, meanwhile, will produce a show based on Loki, the popular trickster god from “Thor,” starring Tom Hiddleston.

Those newly announced shows join a crowded slate that includes a Pixar-produced “Monsters Inc.” series, a Disney Channel “High School Music” revival, and Jon Favreau’s Star Wars series “The Mandalorian.”

It remains to be seen what Disney will charge for the streaming service. The company’s ESPN+ app, launched earlier this year, costs subscribers $4.99 a month.

Iger said the company would provide a closer look at the Disney-branded service in April, at an investor conference. He added that he saw an “early prototype” of the app last week, during a visit to BAMTech, the video technology company that Disney acquired to build direct-to-consumer apps. The Disney+ app, he said, will be organized into five brands: Disney, Pixar, Marvel, Star Wars and Fox’s National Geographic.

The app “will feature elegant navigation, personalization and content segmented primarily by our core brands,” he said. “We are confident it will be a compelling consumer proposition.”

The outlook

Major questions still remain about how Disney will integrate 21st Century Fox assets into its empire after its deal closes, though its plans have started to take shape over the last few weeks.

In October, the company said Fox executive Peter Rice would be put in charge of the company’s TV business, including ABC, bringing with him high-profile Fox players including Dana Walden, John Landgraf and Gary Knell. Some prominent Fox film executives, including production head Emma Watts, will also join the new company.

Disney has been eager to clear international regulatory hurdles to complete its purchase of Rupert Murdoch’s entertainment properties. The European Union in Brussels said Tuesday that it had conditionally approved the deal, but that Disney must sell its stake in History, Lifetime, Crime + Investigation and Blaze television channels in Europe.

The company must divest Fox’s 22 regional sports networks as a condition for regulatory approval in the United States. Analysts didn’t broach that subject.

After the close of the deal, Disney will own 60% of Hulu, leaving Comcast Corp. with 30% of the streamer and AT&T-WarnerMedia with the remaining 10%. Iger said Disney plans to ramp up funding for original content on Hulu, and reiterated that its programming efforts for Hulu would focus on the kinds of shows that don’t fit on Disney’s family-oriented service.

“We aim to use the television production capabilities of the combined company to fuel Hulu with a lot more original programming ... that we feel will enable Hulu to compete even more aggressively in the marketplace,” Iger said.

UPDATES:

3:29 p.m.: This article was updated to include details from an call with analysts.

This article was originally published at 1:50 p.m.