2/8/2024

Disney is investing in the gaming industry

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Key points:

  • Disney has announced an investment in Epic Games and plans to launch a sports streaming service.
  • Together, the moves helped lift Disney shares nearly 7% in after-hours trading.
  • Despite the mixed current results, the company forecasts positive trends in revenue and subscriber growth.

On Wednesday, The Walt Disney Company’s CEO, Bob Iger, disclosed significant developments to investors, including a notable investment in Epic Games, the creator of “Fortnite,” and outlined the intention to introduce the ESPN streaming service in 2025.

Iger made these announcements following the board’s approval of a $3 billion share buyback initiative for the ongoing fiscal year and the declaration of a 45 cents per share dividend, indicating a 50% increase from January. Notably, the earnings per share surpassed Wall Street’s predictions.

Collectively, these strategic moves contributed to a nearly 7% surge in Disney’s shares during after-hours trading.

Disney’s ambitious plans

In a series of new endeavors, CEO Bob Iger highlighted Disney’s plan to invest $1.5 billion in acquiring a stake in Epic Games. He emphasized that this collaboration aims to build an expansive Disney universe, allowing consumers to engage with characters and narratives from Disney, Pixar, Marvel, Star Wars, and Avatar.

“This marks Disney’s largest foray into gaming and opens up significant opportunities for growth and expansion.”

— Iger added in his statement.

This partnership marks Disney’s renewed venture into interactive entertainment, following the closure of Disney Interactive Studios in 2016, which was responsible for the “Infinity” game series. At that time, Disney had announced its decision to license its characters to external game companies. Additionally, just a day before, Disney disclosed its intention to form a joint venture with Fox and Warner Bros Discovery for the launch of a sports streaming service.

Bob Iger expressed satisfaction with the quarterly results and the introduction of new initiatives, portraying the team as motivated, focused, and highly optimistic about the future.

Current company results

For the quarter just ended, Disney reported earnings of $1.22 per share, beating analysts’ consensus estimates of 99 cents per share. Quarterly revenue was comparable to a year ago at $23.5 billion, but below the $23.6 billion forecast.

Disney said it cut costs across its business by $500 million during the quarter and that it remains on track to achieve $7.5 billion in cost savings by the end of the current fiscal year.

Disney has confirmed that its streaming business will reach profitability by September. Streaming operating losses fell to $138 million for the quarter, a significant improvement from a year earlier, when the company lost nearly $1 billion. Moreover, streaming service Disney+ lost 1.3 million subscribers, nearly double analysts’ forecast of 700,000 after the October price increase.

However, the company forecasts that it will have between 5.5 million and 6 million Disney+ subscribers in the second quarter, as well as positive revenue per user trends.

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