Disney TV eases shift to streaming

WALT DISNEY CO. is embarking on a mission to become a streaming-TV company, challenging Netflix Inc. headon. But for now, it’s traditional TV that’s holding up better than expected. Soaring sales and profit at the ABC network and local TV stations helped Disney beat analysts’ forecasts for the first quarter — and overcome another tough stretch for the ESPN sports network. The entertainment giant credited higher fees from pay-TV services, rising ad revenue and more sales of programs to other companies. Disney has warned that fiscal 2019 will be a tough year as the company takes over most of 21st Century Fox Inc. and develops programs for three online video services: ESPN+, Disney+ and Hulu. But its diverse business groups, from parks and hotels to movies and home entertainment, are softening the blow for investors. “This is a bet on the future of our business,’’ Chief Executive Officer Bob Iger said on a conference call. The question now is how painful the streaming shift will be. Disney will have to pull shows and movies from platforms like Netflix as it works to build its own offerings. Already, that’s having an impact. Company executives said film and TV profit from selling shows to competitors like Netflix will drop by $150 million this year. Another cloud: A shift in the Easter holiday and changes in how Disney recognizes revenue will cut theme-park profit in the current quarter by $125 million. Disney said it now has more than 2 million subscribers to ESPN+, the $5-a-month sports streaming service launched last April. Nearly 600,000 of those came last month as a result of the company’s first big UFC fight, signed under a five-year-deal with the mixed martial arts league. Mr. Iger said the rollout of the service has proven that the company’s BamTech streaming platform is reliable, even during major events, and the ESPN network itself has helped promote the product. The company plans to launch Disney+, a service featuring films and TV shows from its Marvel, Pixar, and Star Wars brands, later this year. Over the next few months, Disney will complete the $71 billion acquisition of Fox assets, a deal that will give the company majority control of the Hulu streaming service, as well as many other channels and film franchises.