The force of Star Wars lifted Walt Disney Co. shares on Thursday as the promise of a new film trilogy overshadowed disappointing quarterly results and struggles at the media company’s television business.
The storied movie studio and theme park operator is scrambling to keep viewers who are abandoning its current top money maker, cable networks. The power of its characters and brands are the reason many investors stick with the company despite its challenges.
Disney shares rose more than one per cent after chief executive Bob Iger said Disney had struck a deal with Rian Johnson, director of upcoming film Star Wars: The Last Jedi, to create a new trilogy in the blockbuster science fiction series.
A live-action Star Wars TV series is also being developed for a streaming service that Disney is launching to capture online audiences, Iger said.
Disney shares rose about one per cent from their Thursday closing price to $103.57 after the Star Wars announcements, reversing an initial fall-off after Disney’s results raised concerns about cable subscriptions. Subscribers and advertising revenue both fell at ESPN, the sports powerhouse that is seen as a proxy for Disney’s ability to fight the rapid migration of audiences to online viewing. Affiliate revenue rose and overall results at ESPN were comparable to the prior year for the quarter that ended in September, Disney said.
Total revenue from Disney’s cable business, the largest unit which includes ESPN and the Disney Channel, fell marginally to $3.95 billion in the fourth quarter, missing the $4.06 billion consensus of analysts polled by Thomson Reuters.
To address challenges in its TV networks business, Disney is developing family-friendly streaming services that it will sell directly to consumers to compete with Netflix Inc. and other rivals. Building those businesses tops the company’s agenda for the next year, Iger told analysts on a conference call.
“We believe creating a direct-to-consumer relationship is vital to the future of our media businesses, and it’s our highest priority this year,” he said.
New Disney releases will go to the company’s own service rather than Netflix, starting in 2019, and Iger on Thursday said the new service would be priced “substantially below” that of Netflix, a reflection of having less content. Disney’s sports-focused service will launch in early 2018 and will be called ESPN Plus, Iger said.
Investors remain concerned about Disney’s cable business and were buoyed by the potential of the Star Wars franchise and the pricing of the streaming service, Tigress Financial Partners analyst Ivan Feinseth said. The Last Jedi hitting theatres in December, could ring up $2 billion in global box office sales, he said.