The Register Citizen (Torrington, CT)
Disney to boost spending on parks, ‘Star Wars’
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.