Disney drops 8% after revenue miss, warns of lengthy YouTube TV fight
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Disney shares plunged 8% in early trading Thursday after the company reported disappointing revenue and warned of a prolonged distribution fight with YouTube TV.
Why it matters: Disney+ and Hulu's continued growth was overshadowed by a streaming-era carriage disagreement and declines in the legacy TV business.
Zoom in: Entertainment revenue for the fiscal fourth quarter declined 6% from a year ago, dragged down by a 21% drop in linear network revenue.
- Disney said domestic advertising revenue fell due to both lower rates and a decline in average viewership.
- Overall, Disney reported adjusted earnings of $1.11 per share on revenue of $22.46 billion. Analysts had expected EPS of $1.05 on revenue of $22.75 billion, per CNBC.
Yes, but: Disney's streaming business helped offset difficulties elsewhere in the entertainment unit.
- While the overall entertainment segment reported a 35% plunge in operating income, the direct-to-consumer unit's operating income surged 39%.
- Disney reported a total of 196 million Disney+ and Hulu subscribers.
Catch up quick: Millions of YouTube TV subscribers lost access to Disney channels in late October after the companies failed to reach a new distribution deal.
- Disney CFO Hugh Johnston said during an earnings call Thursday that negotiations with YouTube "could go for a little while."
- "In terms of the dollar impacts, keep in mind, there's two pieces to it. There's the piece that we're not getting paid for and then the piece that we're picking up by virtue of subscribers moving elsewhere," he said.
- While this is YouTube's fourth carriage dispute with a major content provider since August, a key difference in the Disney fight is that the company operates a competitor pay-TV product in Hulu + Live TV.
What they're saying: Disney CEO Bob Iger said the deal the company proposed to YouTube "is equal to or better than what other large distributors have already agreed to."
- "While we've been working tirelessly to close this deal and restore our channels to the platform, it's also imperative that we make sure that we agree to a deal that reflects the value that we deliver," he said in an earnings call Thursday.
- Iger also said both YouTube and parent company Alphabet have told Disney its value "is greater than the value of any other provider."
What to watch: How Disney and YouTube structure an eventual deal to resolve their current disagreement.
- YouTube has reportedly explored creating a separate sports package, and Disney launched a new streaming service for ESPN in August.
