The Q3 results of Disney were published on Tuesday and it failed the meet the expectations of the investors. The earnings indicate a drop of 28 percent from the last year’s figures. By the mid-Wednesday, the company’s stocks which were at an all-time high mark last week, fell by almost 5 percent to a value of $7.44.
The ongoing integration of Disney with the assets of 21st Century Fox which it acquired through a $71 billion deal that closed in March, was marked as a major reason for the missed target. The dismal performance of the movie “Dark Phoenix”, which was a Fox production is also another factor for the disappointing results.
The operating loss was reported at $553 million from April to June, which is much higher than what the analysts were expecting. The huge spending behind the upcoming Disney+ service, ESPN and Hulu was marked as another reason for this loss. Apart for that, the costs behind the broadcasting of cricket matches through Fox’s Star India were much higher than expected. As per the company statements, the planned investment in the coming months will lead to the loss figures running to $900 million by the quarter ending in September.
The overall operating income from the theme parks segment were at $1.7 billion, showing a growth of 4 percent, even though Disney’s U.S. parks showed a decline in numbers. Disney’s Studio Entertainment revenue rose by 33 percent, boosted by the performance of “Avengers: Endgame.” It became the highest-grossing movie of all time by breaking the records set earlier by Fox’s “Avatar”. The performances of “Toy Story 4” and “Aladdin” also helped in raising the figures.
Disney is the owner of ESPN and is investing heavily in the launching of the Disney+ streaming service to challenge the dominance of Netflix Inc. in that field. Disney+ will be a family-friendly service with a wide range of content from Disney, Pixar, Marvel, Star Wars and more. The shows with more adult themes will be streamed through Hulu, which is now under Disney’s control.
Experts are of the opinion that even though the reports are shocking, investors should not lose hope with Disney with just one unexpected quarterly earnings report. J.P. Morgan ’s Alexia Quadrani mentioned that “With so many moving pieces between the newly acquired Fox and Disney+ launch, there are bound to be some hits and misses each quarter.”
Disney Chief Executive Bob Iger said in a call with the analysts that the company will move ahead with its ambitious plans in the streaming business. “Nothing is more important to us than getting this right,” he said. “We’re clearly bullish on our future, and for good reason.”
Disney movies have already surpassed a figure of $8 billion at the worldwide box office in this year, which is a new record for the industry.