Disney Posts Higher Earnings, Plans ESPN OTT Streaming Service

BURBANK: The Walt Disney Company, which presented its Q3 earnings report yesterday, has picked up a 33-percent stake in the video-streaming outfit BAMTech, with plans to launch a new ESPN-branded OTT service.

BAMTech was formed by Major League Baseball (MLB), but has now separated from MLB’s broader digital business, MLB Advanced Media (MLBAM). Disney will pay $1 billion for the minority interest in two installments, now and in January 2017, and has the option to acquire majority ownership in the coming years. BAMTech will collaborate with Disney to launch and distribute a new ESPN-branded multi-sport subscription streaming service. The direct-to-consumer platform will feature content provided by both BAMTech and ESPN, including live regional, national and international sporting events. It will not include current content on ESPN’s linear networks. Additionally, BAMTech will become a key partner for Disney in the delivery and support of streaming video and other digital products from Disney-ABC Television Group and ESPN, as well as future digital initiatives across the company.

“Our investment in BAMTech gives us the technology infrastructure we need to quickly scale and monetize our streaming capabilities at ESPN and across our company,” said Robert A. Iger, the chairman and CEO of The Walt Disney Company. “We look forward to working closely with BAMTech as we explore new ways to deliver the unmatched content of The Walt Disney Company across a variety of platforms.”

Commissioner of Baseball Robert D. Manfred, Jr. stated, “Every day the powerful partnership of technology and content becomes more important to consumers. We are excited to get to work with Disney and our longtime partners at ESPN in the important and ever-changing area of content distribution.”

“Bringing a multi-sport service directly to fans is an exciting opportunity that capitalizes on BAMTech’s premier digital distribution platform and continues ESPN’s heritage of embracing technology to create new ways to connect fans with sports,” said John Skipper, ESPN’s president and co-chair of Disney Media Networks. “As WatchESPN continues to grow and add value to the multichannel video subscription, this new service will be an outstanding complement.”

The Walt Disney Company reported quarterly earnings of $2.6 billion for its third fiscal quarter ended July 2, a gain of 5 percent compared to the prior-year quarter. Revenues were $14.3 billion, up 9 percent in the year-on-year comparison.

Media Networks revenues for the quarter increased 2 percent to $5.9 billion and segment operating income decreased $6 million to $2.4 billion.

Cable Networks revenues for the quarter were up 1 percent to $4.2 billion and operating income increased 1 percent to $2.1 billion. The increase in operating income was due to growth at ESPN, partially offset by a decrease at the Disney Channels, lower equity income from A&E and lower Freeform results.

Broadcasting revenues for the quarter gained 5 percent to $1.7 billion, and operating income decreased 6 percent to $282 million. The decrease in operating income was due to lower network advertising revenues, higher equity losses from Hulu and increased cost write-downs for network programming, partially offset by affiliate revenue growth and higher operating income from program sales.

Revenues from the Parks and Resorts segment for the quarter increased 6 percent to $4.4 billion and segment operating income increased 8 percent to $994 million.

Studio Entertainment revenues grew 40 percent to $2.8 billion and segment operating income increased 62 percent to $766 million. Higher operating income was due to increases in theatrical and home entertainment distribution results, partially offset by an unfavorable impact from foreign currency translation.

Consumer Products & Interactive Media revenues were 1-percent lower year on year at $1.1 billion and segment operating income decreased 7 percent to $324 million.

“Disney delivered another quarter of double-digit EPS growth, and we are thrilled with our continued performance,” said Iger. “Our results are evidence that our asset mix is strong, as is our ability to execute in ways that enhance the Disney brand and create value for our shareholders while we invest for future growth.”