Walt Disney Co. signaled potential trouble for its traditional TV business after its Chief Financial Officer, Hugh Johnston, warned analysts that the ongoing distribution dispute with YouTube TV could be a "prolonged fight." Johnston stated that Disney has "built a hedge" into its financial forecasts to account for a dragged-out negotiation.
The carriage rights dispute, which caused Disney's networks to disappear from YouTube TV (the fourth-largest pay-TV provider with about 10 million subscribers) on October 30, is a major concern for investors, leading to an 8.3% drop in Disney shares on Thursday afternoon. Analysts estimate a 14-day blackout alone would cost Disney about $60 million in revenue.
CEO Bob Iger defended Disney's stance, arguing that the proposed deal is "equal to or better than what other large distributors have already agreed to," underscoring that YouTube/Alphabet themselves acknowledge the superior value Disney delivers.
Overall Revenue$22.5 billion (vs. $22.75 billion forecast), Traditional TV (Cable) Profit fell 21% to $391 million; ESPN income slipped., Direct-to-Consumer (Streaming) Earnings rose 39% to $352 million; Added 12.5 million subs (Disney+/Hulu), reaching 196 million total. Theme Parks Profit rose 13% to $1.88 billion (aided by cruise and Disneyland Paris). Entertainment (Films) Operating income slumped by over a third due to films underperforming last year's successes.
Despite the cable weakness, Disney is offsetting losses by investing heavily in streaming and its parks. The company also announced plans to boost its dividend by 50% to $1.50 per share and double its share buyback plan to $7 billion for fiscal 2026. Adjusted earnings per share were $1.11, slightly above analyst estimates. Looking ahead, Iger also discussed conversations with artificial intelligence (AI) companies, noting phenomenal opportunities to deploy AI on direct-to-consumer platforms to create more dynamic tools and even allow subscribers to create short-form content.
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