Disney's Traditional TV Woes Overshadow Parks, Streaming Success

Bloomberg's Geetha Ranganathan breaks down Disney earnings and what ESPN's new NFL deal could signal about the media giant's future.

Walt Disney Co. gave a mixed earnings report on Wednesday, highlighting strength in its streaming and parks business in the fiscal third quarter, while giving a tepid outlook for profit this year.

Overall revenue increased 2.1% to $23.7 billion in the three months ended June 28, Disney said in a statement Wednesday, in line with projections. Earnings rose to $1.61 a share, excluding some items, beating the $1.46 average analyst’s estimate, according to data compiled by Bloomberg.

For the full year, Disney said it expects earnings of $5.85 a share, up from a prior estimate of $5.75, while some analysts had been expecting more. Operating income at the parks division is expected to rise 8% in the period, the top end of its previous estimate. The company also forecast $1.3 billion in profit from its streaming business, up from an earlier forecast of $1 billion.

The shares slid 3.7% to $113.99 in New York. They are up 2.3% this year.

“I think it’s pretty simple,” Wall Street wanted the guidance for adjusted EPS to move up to $6.00, said Jason Bazinet, an analyst at Citigroup Global Markets.

The earnings report came alongside a flurry of streaming news at the Burbank, California-based entertainment giant, including the fact that Disney will stop reporting subscriber numbers in the future. Disney has been making a big push into streaming as viewership at its traditional TV networks drops off, with new projects built around its sports franchise ESPN and Hulu.

ESPN is getting a fresh spin with the Aug. 21 launch of a new streaming app for $30 a month, giving sports fans access to all of the company’s traditional TV channels and more interactive features. Disney will also offer the new ESPN as part of a bundle with Hulu and Disney+ for $36 a month.

On Tuesday, Disney announced new deals with the National Football League, which will sell most of its media businesses to Disney in exchange for a 10% stake in ESPN, deepening the ties between the league and one of its top broadcast partners.

The assets include NFL RedZone, a subscription-based highlights service, and the NFL Network cable channel, according to a statement Tuesday.

Following the closing of the transaction, Disney will hold a 72% stake in ESPN and partner Hearst Communications Inc. will have 18%. That deal is subject to regulatory approvals and expected to close at the end of 2026.

On Wednesday, ESPN detailed an expanded content deal with the NFL, including an extension of the NFL Draft rights, and announced a major new deal with TKO Group’s World Wrestling Entertainment to become the exclusive US home of WWE Premium Live Events, including WrestleMania. The five-year contract, which begins in 2026, is valued at more than $1.6 billion, the Wall Street Journal reported.

The company is taking “major steps forward in streaming,” and “creating a truly differentiated streaming proposition,” Chief Executive Officer Bob Iger said in a statement. “With ambitious plans ahead for all our businesses, we’re not done building.”

The ESPN deal with the NFL will be accretive to Disney’s earnings in the first year after it closes, Iger said, speaking to analysts on a call to discuss the financial results. The revenue that Disney will derive from distributing the NFL network and other properties will increase revenue and operating income for the ESPN business, Iger said. It will also potentially lower churn rates for the ESPN app and bring in additional advertising as well.

“This is one of the most important steps ESPN has taken,” Iger said. The various deals will give ESPN a window for 28 NFL games, more than ever before. Iger said Disney has also held talks with other companies about potentially bundling sports offerings, but declined to give more details.

In the coming months, Disney will also further integrate its Disney+ and Hulu streaming services into a single app, which will employ a single recommendation engine and include a larger slate of programming such as ABC News.

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