Dis­ney to boost spend­ing on theme parks, ‘Star Wars’

New Haven Register (New Haven, CT) - - FRONT PAGE - BLOOMBERG

Walt Dis­ney Co. is go­ing to spend its way out of its prob­lems.

The world’s largest en­ter­tain­ment com­pany, which re­ported lower profit Thurs­day, is al­ready work­ing on a new se­ries of “Star Wars” films, movies that can cost $250 mil­lion each. The com­pany will spend $1 bil­lion more on its theme parks in the new fis­cal year and plans to start mak­ing movies and TV shows for a new stream­ing ser­vice that will launch in 2019.

Shares of Dis­ney jumped as much as 3.5 per­cent, the big­gest in­tra­day gain since Novem­ber 2016, eras­ing the stock’s losses for the year.

Bur­bank, Calif.-based Dis­ney is try­ing to adapt to up­heaval in the TV and film in­dus­tries trig­gered by new en­ter­tain­ment op­tions like the Net­flix stream­ing ser­vice. View­ers are spend­ing less time with con­ven­tional me­dia, whether it’s tele­vised sports, DVDs or fea­ture films on the big screen, and that’s forc­ing com­pa­nies like Dis­ney to reach out to them di­rectly. All those costs will weigh on profit, the com­pany said.

A wicked hur­ri­cane sea­son, falling ad­ver­tis­ing sales and a can­celed movie sapped fourth-quar­ter profit at Dis­ney, the com­pany said, lead­ing to the first drop in an­nual re­sults since the fi­nan­cial cri­sis al­most a decade ago. The down­draft from bad weather, lower ad sales and a tough year for movies was too pow­er­ful even for Dis­ney, which counts on TV, theme parks, con­sumer prod­ucts and its fa­mous stu­dio to fuel growth. Chief Ex­ec­u­tive Of­fi­cer Bob Iger warned a year ago that fis­cal 2017 would be an “anom­aly” and fol­lowed up by say­ing earn­ings would be “roughly in line” with last year. His fore­cast was al­most spot on.

Fourth-quar­ter profit at Dis­ney’s ca­ble TV unit, the com­pany’s sin­gle big­gest profit con­trib­u­tor, slumped 1.2 per­cent to $1.24 bil­lion, hurt by weak ad­ver­tis­ing sales and higher pro­gram­ming costs for base­ball and foot­ball at ESPN. Af­fil­i­ate fees rose even as sub­scribers de­clined. ESPN plans to fire about 100 em­ploy­ees in a new round of job cuts, ac­cord­ing to a per­son with knowl­edge of the mat­ter who asked not to be iden­ti­fied.

In re­cent quar­ters, the com­pany’s theme-park divi­sion came to the res­cue with strong earn­ings, driven by higher ticket prices and guest spend­ing, along with new at­trac­tions that boosted at­ten­dance. Although profit rose, Hur­ri­cane Irma forced Dis­ney to close its four Or­lando, Fla., parks for two days and can­cel three cruises. Do­mes­tic re­sort profits fell.

Cap­i­tal spend­ing in the cur­rent year will rise by about $1 bil­lion, driven par­tic­u­larly by parks and re­sorts, Iger said. The com­pany has Star Wars lands un­der con­struc­tion in both Cal­i­for­nia and Florida, and Toy Story Lands be­ing built in Or­lando and Shang­hai. Cap­i­tal spend­ing to­taled $3.63 bil­lion in the year just ended.

Gina Fer­azzi / Tri­bune News Ser­vice

Fans get a pre­view of Stars Wars: Galaxy’s Edge, a new area un­der con­struc­tion at Dis­ney­land, in July.

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