While describing a number of features for ESPN’s upcoming direct-to-consumer product and its monthly subscription fee, Walt Disney Co. executives did not provide a launch date for the streaming service.
Disney Chairman and CEO Bob Iger said during the company's Feb. 6 earnings calls with analysts that ESPN Plus will carry a monthly price point of $4.99, reiterating the service will bow sometime this spring and offer thousands of additional live events across Major League Baseball, Major League Soccer, the National Hockey League and an array of college sports. Moreover, it will feature tennis, boxing, golf, rugby and cricket action that is not currently available on ESPN (US) and the sports programmer's other linear networks.
Moreover, ESPN Plus will be home to the full library of ESPN films, including the "30 for 30" documentary series. Iger said the company is also "creating a robust slate of high-quality original content exclusively for this platform."
At what point subscribers will gain access to the content via a redesigned app remains unclear. Iger did say BAMTech will power the service and provide data collection and management capabilities, plus the "bells and whistles from a personalization, customization perspective that it can provide." Both video and written stories will be customizable by teams, locations and general interest. Iger noted that machine learning elements will enable the app "to determine what someone is interested in and feed them more of that as they use the app more."
Iger also discussed the announcement made just before the earnings call that "Game of Thrones" creators David Benioff and D.B. Weiss will expand the company's "Star Wars" universe, writing a new series of films. Iger noted the upcoming 2019 Disney branded DTC service, which is still scheduled to bow late in 2019, will include "Stars Wars"-related series with "rather significant" talent, but declined to provide further details because the deals have not been finalized.
From an affiliate standpoint, total media networks revenue rose 4% in the fiscal first quarter of 2018 due to growth at both the cable and broadcasting segments. Higher affiliate revenue was driven by 7 points of growth, owing to higher rates, partially offset by about a 3-point decline in cable subscribers. However, Disney CFO Christine McCarthy said the 3% drop in subscribers represented "modest sequential improvement in Q1, which is the second consecutive quarter that we've seen this trend. And the growth is being driven by adoption of the digital MVPD platforms."
McCarthy said Disney's results reflected a $1.6 billion one-time net benefit from tax reform, "driven primarily by the revaluation of our deferred tax liability." The lower statutory rate also resulted in a 22-cent benefit during the period. She said Disney’s federal statutory tax rate will be 24.5% during its fiscal 2018.
Asked about how Disney would deploy the additional cash flow tied to the tax reform, Iger noted that the company over the last few years has increased dividends, continued its share buyback policy and invested in organic growth, notably in the theme parks unit. He expects similar allocations, but does not foresee any more merger activity in light of its pending $52.4 billion purchase of myriad assets from 21st Century Fox Inc.
He did note that the company could look to investment film and TV production that will be aimed at growing its DTC presence, but does not expect to be specific about incremental outlays until the 21st Century deal gets closer to gaining regulatory approval.
During the first quarter of its fiscal 2018 ended Dec. 30, 2017, Disney reported a 3.9% increase in total revenue to $15.35 billion from $14.78 billion in the prior-year period.
Media networks was essentially flat at $6.24 billion in the period, while operating income declined 12% year over year to $1.19 billion.
The company's theme parks and resorts scored a 13% year-over-year revenue advance to $5.15 billion, with operating income ahead 21% to $1.35 billion.
Studio entertainment slipped 1% with revenue to $2.50 billion, as segment operating profit dipped 2% to $829 million.
Consumer products and interactive media, meanwhile, was also on the downside with both measures: revenue decreased 2% to $1.45 billion, with operating income off 4% to $617 million.
Reflecting the aforementioned $1.60 billion one-time tax benefit associated from the federal tax law changes and certain other items impacting comparability, Disney's net income soared 78.2% to $4.42 billion, or $2.91 per share, from $2.48 billion, or $1.55 per share, in the first quarter of its fiscal 2017.
The S&P Capital IQ consensus EPS estimate was $1.61 on both a normalized and GAAP basis.
