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Walt Disney Posts Record Annual Profit

Walt Disney             Co.Chief Executive Robert Iger continued to pitch his company's digital future to investors on Thursday, as the company…

Walt Disney
Co.

Chief Executive Robert Iger continued to pitch his company’s digital future to investors on Thursday, as the company reported a year of massive success for traditional movie releases like ” Black Panther. “

Mr. Iger predicted an accelerated timeline for the mega-drive driving the strategic shift to streaming, saying Disney’s acquisition of major assets of

21

st Century Fox
Inc.


FOX 0.66%

could close “meaningfully earlier” than the mid-2019 date previously projected.

The tie-up will allow Disney to launch a direct-to-consumer service in which television shows based on Disney franchises like “High School Musical” will stream alongside programming from Fox’s National Geographic brand, combining two entertainment forces in a way that could rewrite Hollywood economics as traditional studios taking on new competitors from Silicon Valley and Netflix Inc. .

Disney’s $ 71.3 billion acquisition of Fox is fueling the company’s push for a direct-to-consumer offering featuring the studio’s movies and television shows. On an earning call Thursday announcing fiscal-year results, Mr. Iger revealed the service’s name for the first time: Disney +.

Despite Mr. Iger’s focus on the direct-to-consumer models of the future, it was some of Disney’s most traditional businesses-theme parks and movies-that drove the company to a record performance in its just-ended fiscal year.

As it has been for several quarters, Wall Street’s focus was on Disney’s future as a streaming competitor to Netflix, a strategy being replicated by its competitors. AT & T Inc., which earlier this year closed its acquisition of Time Warner Inc., is pursuing a direct-to-consumer service featuring its HBO channel and other holdings. Tech companies such as Apple Inc. have moved aggressively into entertainment programming in recent months.

Disney is betting that its library of beloved characters and franchises will be enough to attract consumers who are already paying monthly subscriptions to Netflix or maintaining their cable packages.

The company has said that its service, set to launch in late 2019, will feature programming that includes new “Star Wars” series from its Lucas film division and superhero spinoffs from Marvel Studios. Disney’s other two entertainment divisions-Disney Animation and Pixar Animation-will be represented on the service, as well as programming from National Geographic, which Disney will acquire as part of the Fox deal.

“It will be very fire-centric,” said Mr. Iger.

Disney has announced programming for the newly dubbed Disney + Piece, and more information is coming: the company said it would host investors in April for a presentation of its streaming service plans. A website promoting the service went live during Thursday’s earning call.

In addition to its Disney-branded service, the company will also manage ESPN +, released earlier this year after several quarters of sagging subscription numbers for ESPN’s cable channel, and Hulu, over which it is gaining majority control in the Fox deal.

The Disney-Fox deal will reduce the number of major Hollywood studios to five from six. Disney will be producing some movies exclusively for its streaming service, while also distributing features with traditional theatrical releases; but Mr. Iger said he had no plans to shorten the “window” of time between a movie’s theatrical debut and its availability in the home.

Earlier this week, the antitrust authority of the European Union approved the Disney-Fox tie-up, although some international jurisdictions have yet to weigh in.

The $ 71.3 billion price tag on the deal is expected to shrink by more than $ 20 billion with the sale of Fox’s stake in European pay-TV operator Sky PLC to Comcast Corp. and a Justice Department mandate to sell off Fox’s regional sports networks. Fox and News Corp, parent company of The Wall Street Journal, share common ownership.

Despite losing the Sky stake to Comcast, Disney will roll out Disney + in Europe, Mr. Iger said, and the company plans to introduce Hulu to more foreign markets once it assumes majority control.

Profit for the three months ended Sept. 29 rose 33% to $ 2.32 billion, or $ 1.55 a share, while revenue rose 12% to $ 14.31 billion. Excluding one-time items, Disney earned $ 1.48 a share.

Analysts surveyed by FactSet expected $ 1.34 a share in adjusted profit of $ 13.73 billion in revenue.

For the year, Disney reported a record annual profit of $ 12.6 billion at $ 59.43 billion in revenue, compared with a profit of $ 8.98 billion and $ 55.14 billion in revenue a year earlier.

Disney has released five of the 10 highest-grossing movies of 2018; its fiscal year, which ended Sept. 29, included gigantic hits such as “Black Panther,” “Avengers: Infinity War” and “The Incredibles 2,” three movies that alone collected nearly $ 2 billion in ticket sales in the U.S. and Canada. Operating income for Disney’s studio entertainment division rose 27% from last year.

Disney’s parks and resorts division saw operating income climb 18% as attendance and prices continued to rise at its domestic locations.

Disney also said it was taking a $ 157 million impairment charge on its investment in Vice Media, which plans to cut its workforce by as much as 15% to combat stalling growth.

Write to Erich Schwartzel at [email protected] and Maria Armental at [email protected]

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