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Disney Executives Talk Marvel, Streaming, and Fox

By Danny Vena - May 14, 2018 at 9:31AM

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The media giant provided a wealth of information for shareholders that went beyond the financials.

The Walt Disney Company (DIS 1.84%) continued its return to growth, producing another solid performance in the second quarter, besting expectations with standout results by the company's studio entertainment and parks and resorts segments. The company produced revenue of $14.55 billion, up 9% year over year, and adjusted earnings per share of $1.84. This beat analysts' consensus estimates for revenue of $14.08 billion and earnings of $1.69 per share.

There was a lot going on at the House of Mouse, and Disney management provided additional information to help investors make sense of it all, both on the conference call to discuss the results and during a subsequent interview given by Disney CEO Bob Iger. This included insights into the recent string of Marvel blockbusters, the company's streaming ambitions, and the pending acquisition of assets from Twenty-First Century Fox (FOX) (FOXA).

The Avengers, led by Captain America and Black Panther race towards an unseen foe.

Record-breaking blockbusters helped boost Disney's results. Image source: Disney.

Record-breaking performances

The unprecedented success of Marvel's Black Panther helped lead Disney's studio segment to revenue of $2.45 billion, which grew 21% compared to the prior year quarter. The film, which details the exploits of the superhero king of the fictional African nation of Wakanda, has already garnered more than $1.3 billion in worldwide box office and is still in theaters. Christine McCarthy, Disney's CFO said, "We couldn't be more pleased with the performance of Black Panther, which surpassed our expectations and drove a meaningful increase in our worldwide theatrical results."

The recent release of Avengers: Infinity War shattered both domestic and worldwide records for opening weekend ticket sales, to "become the largest movie opening in history." The film was so successful, in fact, that Iger wanted to dispel the notion that next year's conclusion movie would be the last we would see of the Avengers.

The goal of course was for the fourth Avengers series to have a significant conclusion, but given the popularity of the characters and given the popularity of the franchise, I don't think people should conclude that there'll never be another Avengers movie ... We've plotted out Marvel movies that will take us well into the next decade. 

Its entry into streaming

Disney's highly anticipated foray into the streaming video space has begun, and the company provided updates on this front.

The company recently launched its long-awaited ESPN+ streaming service, marketed as a companion to its flagship sports network. While not providing any specific subscribers metrics, the company said that reviews of the product were "strong and the response of sports fans has been enthusiastic."

Disney also discussed its deal with mixed martial arts organization UFC, saying it would add "a rich slat of UFC content to the mix." The agreement will bring exclusive content to a variety of Disney's distribution channels starting in January 2019, including 15 live events, branded "UFC on ESPN+ Fight Night" that will stream exclusively on ESPN+, and feature a "full card of 12 UFC bouts." 

ESPN+ and UFC Coming January 2019.

Disney is stocking its ESPN streaming service with content. Image source: UFC.

Iger revealed that Disney would be releasing a dozen movies over the coming 18 months, including Ant-Man and the Wasp, Mary Poppins Returns, Dumbo, Aladdin, Avengers 4, and Star Wars: Episode 9. Using those films as a backdrop, Iger said:

This collection gives you a real sense of what's in store when we launch our Disney branded, direct-to-consumer service in late 2019. We are creating a truly unique value proposition for consumers, a service focused on quality over quantity ... Our content strategy includes a rich mix of beloved classics, recent releases, and new content being created exclusively for the new platform by Disney, Pixar, Marvel, and Lucasfilm.

Mega-media marriage

On the conference call, Disney executives didn't speculate on media reports that cable operator Comcast was putting together a rival bid for the Fox assets.

However, in a subsequent interview with Bloomberg, Iger reminded investors that Fox's board had already unanimously approved the acquisition, and that Disney was "confident that [the deal] will ultimately go forward." When pressed about the possibility of a bidding war with Comcast, Iger said it was "way too early" to speculate about that. He focused instead on the regulatory process, saying that he believed that Disney would ultimately receive the necessary approvals to consummate the agreement. 

These comments show that Disney's success isn't beholden to a single segment, but rather comes from a large and growing treasure trove of content that's leveraged across the company's businesses. While the stock has been stuck in a rut for some time, I think it would be foolhardy to count out the House of Mouse.

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