Disney beats estimates, buys video streaming stake to lure web viewers
By Lisa Richwine and Anya George Tharakan
(Reuters) - Walt Disney Co's quarterly profit and revenue on Tuesday beat analysts' estimates fueled by movie studio hits, and the media company said it was taking a stake in a streaming video technology company to sell more content directly to consumers.
Disney and other media companies are struggling with "cord cutting" consumers who abandon large bundles of channels sold by cable TV providers. In buying a 33 percent stake in video-streaming firm BAMTech for $1 billion, Disney is hoping to lure online viewers. It will begin with an ESPN subscription streaming service by year's end.
The service will not, however, include any of the content that appears on ESPN's TV networks, Disney said.
Disney has the option to acquire majority ownership in coming years in BAMTech, which was formed by Major League Baseball (MLB) and is separate from the league's content business. The technology is lauded as some of the best in the industry and is used by HBO Now and the National Hockey League as well as baseball.
The investment will help "allay investors fears about Disney's relevance in a world where content is delivered online," Pivotal Research Group analyst Brian Wieser said.
"That said, I think it doesn't do anything specifically to allay fears of unbundling" of cable networks," he said.
Disney Chief Executive Bob Iger described the coming ESPN online service as complementary to its TV channels. Programming will include Major League Baseball and National Hockey League games already licensed to BAMTech, he said.
"Our goal is to ensure that our brands, notably ESPN, remain strong, vital and relevant in a totally changed media landscape," Iger said of the investment. Continued...