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Disney+ Subs Surge to 26.5M, Hulu Ends Fiscal Q1 With 3.2M Live TV Subs

BURBANK, Calif. -- The Walt Disney Company (NYSE: DIS) today reported earnings for its first fiscal quarter ended December 28, 2019. Diluted earnings per share (EPS) from continuing operations for the quarter decreased 37% to $1.17 from $1.86 in the prior-year quarter. Excluding certain items affecting comparability(1), diluted EPS for the quarter decreased 17% to $1.53 from $1.84 in the prior-year quarter.

"We had a strong first quarter, highlighted by the launch of Disney+, which has exceeded even our greatest expectations," said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. "Thanks to our incredible collection of brands, outstanding content from our creative engines and state-of-the-art technology, we believe our direct-to-consumer services, including Disney+, ESPN+ and Hulu, position us well for continued growth in today’s dynamic media environment."

Media Networks
Media Networks revenues for the quarter increased 24% to $7.4 billion, and segment operating income increased 23% to $1.6 billion Cable Networks
Cable Networks revenues for the quarter increased 20% to $4.8 billion and operating income increased 16% to $862 million. Higher operating income was due to the consolidation of TFCF businesses (primarily the FX and National Geographic networks), partially offset by a decrease at ESPN.

The decrease at ESPN was due to an increase in programming and production costs and lower advertising revenue, partially offset by higher affiliate revenue. Higher programming and production costs were driven by rate increases for NFL, College Football Playoffs and other college sports programming as well as costs for the ACC Network, which launched in August 2019. The decrease in advertising revenue was due to lower average viewership. Affiliate revenue growth was due to an increase in contractual rates, partially offset by a decrease in subscribers. The decrease in subscribers was net of the impact of the ACC Network.

Broadcasting
Broadcasting revenues for the quarter increased 34% to $2.6 billion and operating income increased 41% to $575 million. The increase in operating income was due to the consolidation of TFCF, largely reflecting program sales, and a timing benefit from new accounting guidance, partially offset by lower results at our legacy operations.

Direct-to-Consumer & International
Direct-to-Consumer & International revenues for the quarter increased from $0.9 billion to $4.0 billion and segment operating loss increased from $136 million to $693 million. The increase in operating loss was due to costs associated with the launch of Disney+, the consolidation of Hulu and a higher loss at ESPN+. These increases were partially offset by a benefit from the inclusion of the TFCF businesses due to income at the international channels including Star.

The increase in operating loss at ESPN+ was primarily due to higher programming costs, primarily for Ultimate Fighting Championship (UFC) rights, and an increase in marketing spend, partially offset by subscriber revenue growth and UFC pay-per-view fees.

Commencing March 20, 2019, as a result of our acquisition of a controlling interest in Hulu, 100% of Hulu’s revenues and expenses are included in the Direct-to-Consumer & International segment. Prior to March 20, 2019, only the Company’s ownership share of Hulu results was included (as equity in the loss of investees).

The Walt Disney Company

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