Disney’s $1bn stake in video-streaming firm

Walt Disney said it was taking a stake in a streaming video technology company to sell more content directly to consumers, as it reported quarterly profit and revenue that beat analysts’ estimates fuelled by movie studio hits.

Disney and other media companies are struggling with ‘cord cutting’ consumers who abandon large bundles of channels sold by cable TV providers.

In buying a 33% stake in video-streaming firm BAMTech for $1bn (€900m), Disney is hoping to lure online viewers. The service will not include any of the content that appears on ESPN’s TV networks.

Disney has the option to acquire majority ownership in coming years in BAMTech, which was formed by Major League Baseball and is separate from the content business.

The technology is lauded as some of the best in the industry and is used by HBO Now and the National Hockey League as well as baseball.

The investment will help “allay investors fears about Disney’s relevance in a world where content is delivered online,” Pivotal Research Group analyst Brian Wieser said. Disney chief executive Bob Iger described the coming ESPN online service as complementary to its TV channels.

“Our goal is to ensure our brands, notably ESPN, remain strong, vital and relevant in a totally changed media landscape,” Mr Iger said.

For the quarter, Disney’s movie and theme parks divisions topped expectations, although a rise in cable networks revenue and operating profit was slightly below Wall Street targets, according to FactSet StreetAccount.

Shares of Disney, which rose over 2% yesterday, are 6% down this year.

Revenue at Disney’s cable networks business rose 1.4% to $4.20bn in the third quarter to July 2, but missed an analyst consensus of $4.31bn.

ESPN — the company’s cash cow — drove the increase in cable networks operating income due to affiliate and advertising revenue growth, although the number of subscribers fell and programming costs rose.

Jungle Book and Captain America: Civil War fuelled gains at the movie studio, with revenue increasing almost 40% to $2.85bn.

Operating income rose 62% to $766m. Revenue at its theme park and resorts business was up 6% to $4.38bn. The net income attributable to the company rose to $2.6bn, or $1.59 per share, in the third quarter, from $2.48bn, or $1.45 per share, a year earlier. Revenue rose to $14.28bn from $13.10bn.