LOS ANGELES: Disney unveiled plans on Tuesday for Netflix-style streaming services for sports programming from ESPN and Disney movies. It is a striking, multibillion-dollar bid to reposition Disney, the world’s largest entertainment company, for growth and to address worries of cord-cutting in the traditional television business.
Disney’s direct-to-consumer services will start next year. The first one will offer ESPN programming, including baseball, hockey, tennis and college sports — about 10,000 regional and national events in its first year. By 2019, Disney plans to start a separate entertainment service, which will include Pixar movies, Disney Channel television series and film library content.
For the last two years, Disney has not been able to convince investors that ESPN, its longtime growth engine, will keep chugging away — albeit more slowly — even as the network deals with the subscriber erosion that is buffeting the broader cable television business. Its efforts have included paying $1 billion last year for a 33 percent stake in BamTech, which handles streaming for baseball teams and HBO. At the time, Disney said it was working on an ESPN-branded streaming service.
But Wall Street continued to fret, and Disney found itself at the center of speculation that it needed to do something major to keep its programming front-and-center in the online age. Some suggested it should try to buy Netflix outright or consider selling itself to Apple.
Disney responded on Tuesday. The company said it would pay $1.58 billion for an additional 42 percent stake in BamTech. Robert A. Iger, Disney’s chief executive, said the acquisition would help his company compete with streaming giants like Netflix and Amazon by introducing a video home base for all things Disney.
“The media landscape is increasingly defined by direct relationships between content creators and consumers,” Iger said in a statement. “This acquisition and the launch of our direct-to-consumer services mark an entirely new growth strategy for the company.”
He did not say how much subscriptions would cost. In the past, Iger has hinted about a “dynamic” model, with viewers able to pay based on how much they want to watch.
Disney announced the streaming services as it reported weak quarterly earnings. For its fiscal third quarter, the company had a profit totaling $2.37 billion, or $1.51 a share, compared with $2.6 billion or $1.59 a share, a year earlier. Disney had revenue of $14.2 billion in the quarter, down slightly from a year earlier.
Adjusting for a one-time charge related to a legal settlement, Disney had per-share earnings of $1.58 in the most recent quarter. Analysts had expected $1.55.
Among the biggest challenges for Disney in the quarter were costs at ESPN, which recorded about $400 million in incremental expenses because of a new contract with the National Basketball Association. As a result, operating income at Disney Media Networks, which includes ESPN, fell to $1.84 billion, a 22 percent decline.
Expenses also increased at Walt Disney Parks and Resorts, which opened an expansion in Florida based on “Avatar” and brought one of the Disney cruise ships in for refurbishment. But the theme park unit nonetheless reported an 18 percent increase in operating income, to $1.17 billion, because of the timing of the Easter holiday and improved results at overseas parks, including Disneyland Paris.
Disney’s movie studio had a difficult quarter. Its operating income fell 17 percent, to $639 million, because of a lineup of films that could not match last year’s highs. In the most recent quarter, Disney released “Cars 3,” “Pirates of the Caribbean: Dead Men Tell No Tales” and “Guardians of the Galaxy Vol. 2.” In the year-ago quarter, the studio’s blockbusters included “Finding Dory,” “The Jungle Book” and “Captain America: Civil War.” -- NYT