There was much to like when Walt Disney (NYSE: DIS) reported its financial results for the third quarter on Aug. 7. Growth over the year, although the results missed analysts' consensus estimates. Revenue rose 7% year-over-year to $ 15.23 billion. This is attributable to improved results in the media networks, parks and resorts as well as in the studio entertainment sector.
At the quarterly teleconference, which discussed the results with analysts, Disney management gave some pointers to its declining subscriber growth at ESPN. In the Light of Comcast 's recent decision to withdraw from the bidding war for the assets of Twenty-First Century Fox (NASDAQ: FOX) (NASDAQ: FOXA) Disney executives spent most of the call outlining their massive acquisition and how it will fit into the company's streaming plans.
Decline in Subscriber Decline
One of the primary concerns of Disney investors is the declining participation rate for the company's flagship ESPN sports network. With the proliferation of streaming services, consumers are increasingly opting for more expensive cable packages. As the media network business accounts for most of Disney's profits, the decline in ESPN numbers is a growing problem.
A little encouraging news: CFO Christine McCarthy pointed out that we see improvements for the fourth quarter in a row. The net subscriber rate is declining. Although the number of net subscribers is still lower than last year, we are very pleased with the trends we are seeing. "CEO Bob Iger also addressed the problem, ascribing the slower declines in the availability of smaller, more cost-effective cable bundles that" have steadily slowed down the total losses [subscription]. "
The upcoming acquisition
Iger focused on the Most prepared remarks on his view of the "huge potential" resulting from the acquisition of Fox In the wake of the overwhelming approval reached at the recent shareholder vote, Iger said: "[W] we are even more enthusiastic and full of anticipation all occasions. "
Iger talked about the well-known Fox brands ̵
He also highlighted the 20th Century Fox movie with "iconic movie franchises such as Avatar Marvel ] X-Men The Fantastic Four Deadpool Planet of the Apes Kingsman and many others. "Iger said Disney wanted" the Fox assets to improve and accelerate our DTC strategy. " Many have long suspected that this will be the direction the company is going, but this is the first time Iger has confirmed it.
In response to a question from the analyst, Iger realized that Disney's streaming offer would not attempt to compete with Netflix in terms of quantity. He said, "It does not have to be close to the volume that Netflix has because of the value of the brands and the specific value of the programs," cites the consumer appeal of Pixar, Marvel, Disney, Lucasfilm, and finally National Geographic – which he considers good Disney's family-oriented brands.
Iger said that although Netflix has many high quality deals, "they are also in the mass game." And we do not really have to do that. "He said," We always believed that we made the brands and content extremely competitive and successful besides Netflix, Amazon and everyone else on the market. " Iger also reveals that Disney is considering a lower price than Netflix and said, "Incidentally, the price will also reflect a smaller amount of product." He went on to say that Disney's cost to produce and own the content would be far lower than Netflix.
Profit, Place or Show
Many investors are convinced that ultimately there will only be one winner in the streaming market, but Iger does not believe that this is the case. "It's also interesting to note that more than half of US households today subscribe to streaming services," he said. "And on average, they subscribe to three different [subscription video on demand] products."
Iger does not believe that Disney has to win the streaming wars: it just has to be among the top three that consumers ultimately choose – and he thinks Disney will be. I agree with that.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the board of directors of The Motley Fool. Danny Vena owns shares in Amazon, Netflix and Walt Disney and has the following options: Long January 2019, Walt Disney calls $ 85. The Motley Fool owns shares of and recommends Amazon, Netflix and Walt Disney. The Motley Fool has a disclosure policy.