Disney reported solid results for its fiscal first quarter but also disclosed a $110 million hit from an autumn carriage fight with YouTube TV.
Revenue for the quarter ended December 27 ticked up 5% from the year-earlier period to reach $25.98 billion. Diluted earnings per share came in at $1.63, excluding certain items. Wall Street analysts had expected revenue of $25.6 billion and earnings per share of $1.58.
The numbers were released before the start of Monday’s trading day, a window seldom used by media companies to report quarterly earnings. Investors (and Hollywood) are eagerly awaiting a bigger piece of news coming: the naming of CEO Bob Iger’s successor. The Disney board is convening its quarterly meeting this week and is expected to settle on its pick, with Josh D’Amaro, chairman of Disney’s Experiences division, now the betting favorite.
The Sports division posted operating income of $191 million, down 23% from the year-ago period. The company blamed higher programming and production costs, along with a decrease in subscription and affiliate fees, with those negatives wiping out a 10% rise in ad revenue. The YouTube TV battle, which was resolved in mid-November after a 15-day period when ESPN, ABC and other networks were taken off the leading pay-TV service in the middle of the football season, delivered a $110 million blow to operating income.
Experiences, which includes theme parks, resorts and cruise ships, hit $10 billion in revenue for the first time, with operating income of $3.3 billion. Domestic parks attendance inched up 1% and per-capita spending increased 4% in the period.
Entertainment revenue climbed 7% to $11.6 billion, but the number of theatrical releases increased costs, contributing to a 35% drop in operating income in the unit.
As the company had signaled before earnings, the quarter included the release of Zootopia 2, Avatar: Fire and Ash, Predator: Badlands and Tron: Ares , compared with just two releases in the prior-year quarter (Moana 2 and Mufasa: The Lion King). That boosted expenses, but the billion-dollar-plus box office for the Zootopia and Avatar sequels will bring benefits in future quarters.
Entertainment SVOD operating income, anchored by Disney+ and Hulu, soared to $450 million, well ahead of internal projections, with management targeting $500 million in the fiscal second quarter. Price increases phased in during the October-to-December quarter provided a boost. Disney, following Netflix’s example, has stopped reporting subscriber numbers on a quarterly basis, and also no longer discloses average revenue per user.
Iger nodded to his second stint as CEO, which began in November 2022, in the earnings release. (The first lasted from 2005 to 2020.) “As we continue to manage our company for the future, I am incredibly proud of all that we’ve accomplished over the past three years,” he said.
