Disney has confirmed that the business will this year lose around $150m in content licensing revenues – money from content it would have sold to third-party channels and platforms.
The business will instead keep that content for its own services, most notably Disney+, which is expected to launch at the end of this year.
Chief financial officer Christine McCarthy outlined that most of that $150m loss will take place in the second-half of the year. “Captain Marvel, which is coming out in this second quarter, is the first film that we will withhold from our output deals. That’s where you can see the foregone licensing revenue begin.”
Disney also reported a $136m loss in its direct-to-consumer and international segment as a result of costs related to the forthcoming launch of its streamer.
The business, which released results for its first quarter ended 29 December on Tuesday (5 February), revealed that operating loss for the segment increased year-on-year from $42m to $136m.
This was due to increased investment in sports SVOD ESPN+, which was launched in April 2018, and a “loss from streaming technology services and costs” associated with Disney+.
The figures were partially offset by growth at Disney’s international channels and a lower equity loss from Hulu, which has increased subscription and ad revenue.
Overall, the direct-to-consumer and international segment posted revenues of $918m, down 1% from $931m a year ago.
Disney reported revenues of $15.30bn, slightly down year-on-year from $15.35bn but beating Wall Street expectations of $15.14bn. Earnings came in at $1.84 per share, falling 3% from $1.89 but beating estimates of $1.55.
Iger on Hulu and FX
In the results call, Disney boss Bob Iger said that the Mouse and Fox have “already designed much of the integration process” and is prepared to start combining the two businesses as soon as regulatory approval is secured in the last few remaining markets.
The Disney+ platform and a sampling of its original content will be showcased during the business’s Investor Day on 11 April.
Iger outlined that Disney+ will be “pretty heavily weighted to internally sourced [IP] versus externally sourced” content.
“There will be occasion when we would be glad to license from third parties. But because the Fox deal hasn’t closed yet, we can’t take advantage of some of their output capabilities,” he said.
“Because we need to launch the service with some volume and it takes time to ramp up, we’re buying certain products from the outside opportunistically, and we’ll continue to do that.”
Iger remained relatively mum on Hulu ownership going forward, noting that the business currently owns just 30% and, when the Disney-Fox deal closes, it will own only 60%.
The exec was clear that ESPN+, Disney+ and Hulu will operate as three distinct platforms, but noted that “ultimately, our goal would be to use the same tech platform to make it easier for people to sign up for all three should they want to, [with the] same credit card, same username, same password, etc.”
“If they wanted to buy all three, we’d give them that opportunity, potentially at a discount, or two for that matter. But if they wanted to buy one of them, we believe they should be able to, so someone who wants sports should be able to buy just sports and so on.”
Iger also addressed the future of cable channel FX, and how it will fit into the wider strategy – addressing some of the concerns expressed by FX boss Landgraf at the TCAs earlier this week.
The exec said Disney is “extremely impressed” by FX’s programming and relationships with creatives and “intends to fully leverage that in both the traditional side of the FX business, but also in our new businesses.”
“We foresee FX developing and producing product for the Hulu platform, in particular. Probably not the Disney platform because it’s not the kind of programming you typically see in a family environment.”