Disney cuts streaming losses, reveals $1.5bn investment in ‘Fortnite’ maker Epic Games

Fortnite

Disney shares have soared 7% after it revealed a $1.5bn investment in Fortnite maker Epic Games and plans to launch a new ESPN streaming service in 2025.

The news came as the Mouse House revealed it had cut streaming losses to $138m, down from almost $1bn a year ago, but also lost 1.3 million subscribers, almost double the number predicted by analysts.

The company said Disney+ would become profitable by September and forecast between 5.5 and 6 million new subscribers in Q2, while the streaming portion of its Entertainment division – including Hulu and Disney+ Hotstar in India – posted a 15% revenue rise to $5.5bn.

Bob Iger

Entertainment revenues across the entire division – including its pay and free TV services – were down 7% to $9.98bn.

Disney added that it had cut $500m from costs across the quarter, with Iger’s plan to cut $7.5bn set to be achieved by the end of the year.

Iger also detailed plans to work with Epic Games to create a “huge Disney universe” populated by characters from Pixar, Marvel, Star Wars and Avatar that will interact with players.

Iger described the move as “Disney’s biggest entry ever into the world of games”, offering “significant opportunities for growth and expansion.”

It is not the first time Disney has tried its hand at gaming, having shuttered its Disney Interactive Studios unit in 2016.

Sports streamer ESPN+, meanwhile, is set to launch August next year and will be bundled with Hulu and Disney+.

It will offer services such as ESPN Bet, as well as e-commerce and fantasy sports offerings.

Across the business, Disney posted Q1 profit of $1.22 per share, ahead of analyst estimates of $0.99, although revenue was slightly down on predictions at $23.5bn.

Disney’s Iger fights back against Peltz

The moves, which came a day after the Mouse House unveiled a potentially game-changing sport streamer to be launched with Fox and Warner Bros. Discovery, are part of a strategy by CEO Bob Iger to keep activist investor Nelson Peltz at bay.

Peltz has been urging Iger to reevaluate its streaming business to drive profits, with the Disney boss betting that news of the ESPN streamer and the Epic Games investment will buy time.

Peltz’s Trian Fund Management the moves were “déjà vu all over again. We saw this movie last year and we didn’t like the ending.”

Speaking to CNBC following the results, Iger said: “The last thing that we need right now is to be distracted, in terms of our time and our energy, by an activist or activists who have a completely different agenda and don’t understand our company, its assets, even the essence of the Disney brand.”