‘Deadpool & Wolverine’ and ‘Inside Out 2’ propel Disney studio earnings

Superheroes and animation packed a punch for Walt Disney Co. as “Deadpool & Wolverine” and “Inside Out 2” propelled the company’s film studio to one of its best fiscal quarters.
The Burbank media giant reported Thursday that its entertainment business took in $10.8 billion in revenue during its fiscal fourth quarter, an increase of 14% compared with the same period a year earlier. The entertainment segment’s operating income for the quarter totaled $1.1 billion, quadruple the same quarter a year earlier, which included the lackluster “Haunted Mansion.”
For the full year that ended Sept. 28, Disney’s entertainment segment — which includes movies, TV, Disney+ and Hulu — reported revenue of $41.2 billion, up 1% compared with the previous year.
The entertainment business’ results were augmented by another quarter of profitability for the company’s streaming business, which includes Disney+, Hulu and ESPN+.
Disney’s stock rose 6% to $109.23 in midday trading. The shares are up 20% year to date.
“This was a pivotal and successful year for The Walt Disney Co., and thanks to the significant progress we’ve made, we have emerged from a period of considerable challenges and disruption well positioned for growth and optimistic about our future,” Chief Executive Bob Iger said in a statement.
For the fourth quarter, the company brought in overall revenue of $22.6 billion, an increase of 6% compared with the prior year. That put Disney’s year-end revenue at $91.4 billion, up 3% from last year.
Earnings, excluding certain items, for the fourth quarter were 25 cents per share, up from 14 cents a year earlier. For the year, earnings per share were $2.72, up from $1.29. The company’s income before taxes in the fourth quarter decreased 6% to $900 million, though for the year it hit $7.6 billion, up from $4.8 billion a year earlier.
Disney also saw growth in its streaming business, ending the fourth quarter with a total of 174 million Disney+ and Hulu subscribers, and more than 120 million Disney+ paid subscribers, which the company said was an increase of 4.4 million compared with the previous quarter.
Combined revenue for Disney’s three streaming services was $6.3 billion for the quarter, up 13% year over year. The company’s streaming business reported $321 million in operating income for the quarter, contrasted with a loss of $387 million a year earlier. For the year, streaming revenue totaled $24.9 billion, up 14% compared with a year earlier.
Disney’s streaming business is also seeing growth in ad sales, particularly as more than half of new Disney+ customers chose to purchase the ad-supported tier. The company said Disney+ and Hulu ad revenue for the quarter was up 14%, driven by Disney+, and that advertising dollars will continue to be a driver for streaming growth.
Next month, the company plans to add an ESPN tile to the Disney+ homepage, similar to its move earlier this year to integrate Hulu onto Disney+ for subscribers of both services. The idea is to increase viewer engagement and reduce churn. The company plans to introduce an ESPN flagship streaming product next year, which will include coverage of live games, studio shows and commentary, as well as new integrated features, such as sports betting.
“When you apply technology to the presentation of sports, almost anything is possible,” Iger said during a Thursday call with analysts. “Highly customized, highly mobile, fully integrated with all kinds of features.”
The success of Disney’s movies and streaming efforts helped offset the continued decline of its traditional TV networks, including ABC. Television network revenue fell 6% to $2.5 billion while profit dropped 38% to $498 million.
Disney’s so-called experiences business, which includes the theme parks and merchandise, saw more muted growth in the fourth quarter due to inflation, cruise line expansion costs and softer results at international parks, including Paris and Shanghai. Revenue rose 1% to $8.2 billion, while operating income fell 6% to $1.6 billion.
The experiences division closed out the year with $34.1 billion in revenue, up 5% from last year. Long the economic engine that has powered the company, Disney’s theme park finances have been closely watched by analysts, particularly as rival Universal plans to debut its Epic Universe theme park in Orlando, Fla., next year.
Despite that additional competition, the company said it expects to see 6% to 8% growth in operating income next year for the experiences division, with the second half of the year looking especially promising.
“The early bookings that we have next summer are actually positive, so that’s certainly a positive indicator,” Chief Financial Officer Hugh Johnston said. “We also looked at the history of other attractions opening up and other parks opening up in Florida, and it’s generally been beneficial to us.”
Disney’s sports business, which includes ESPN, reported quarterly revenue of $3.9 billion, an increase of less than 1% compared with the previous year. The sports business’ operating income totaled $929 million for the quarter, down 5% from a year earlier.
The decrease was due to an increase in college football rights costs, which upped the company’s production and programming spending, as well as lower affiliate revenue from fewer subscribers, the company said.
For the year, Disney’s sports business reported revenue of $17.6 billion, up 3% compared with the prior year.
The company also said Thursday that its merger of its Star India business into a joint venture had been completed.