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Presto! A small line transforms Disney's results



By adding a small line to their financial reports, Walt Disney Co. Clearly change their image from what a traditional media company has felt the damaging effects of wear, to an innovative streaming giant. And this is months before it even launches the product centrally for its streaming strategy.

Disney posted results for his last quarter late Tuesday, and for the first time included a line item for his cross-country direct consumer business. Today, the department consists of Disney's interests in Hulu and BAMTech, its international channels and the ESPN + sports streaming service released in April last year. These assets generated revenues of $ 918 million – just 6 percent of Disney's total sales – and lost $ 136 million in the period, mainly due to the cost of investing in streaming. But in the end, this business will be led by Disney +, the company's soon-to-come version of Netflix.

While Disney + does not start before the end of 2019, there has already been a lot of buildup. The fact that a company that is as powerful as Disney and so thorough and reticent with its plans goes into the streaming wars is enough to alert competitors before anyone sees a prototype of the app. More importantly, a welcome shift in feelings for Disney has begun. The company's stock had fallen behind the market-based market in recent years, including a decline in the display of some of its TV networks, a trend that hurts advertising advertising, which is traditionally part of the lifeblood of a media company.

This is not Disney's first crack in streaming. It is a small branded product in the UK, called DisneyLife, which has served as a testing environment for Disney streaming strategy since 2015. CEO Bob Iger has previously discussed DisneyLife's experience, such as the technical complexities of running the service on various devices and operating systems, and the importance of getting the subscription price right. Finally, this experience has led to the acquisition of Disney's stake in BAMTech, a streaming technology company, because Iger acknowledged that the team had the technological know-how Disney lacked.

All this helps put the investor's confidence that the company is taking the right approach with the Disney + app, but it is still seeing how the direct consumer business will affect Disney as a whole. As I said in November, a streaming service will complicate decisions, including where to move specific content and concentrate resources. It can bring excitement over the Disney Empire at a time when the company seizes the disruptive integration of its $ 71 billion acquisition of 21st Century Fox Inc.'s movie and TV entertainment opportunities while trying to sort out a success plan for Again, that's 68 this month.

Disney has scored a public relationship win by becoming a streaming company overnight without the streaming product at the center of their plans. But the hard work comes when Disney + faces Netflix, AT & T Inc.'s streaming services suite, and dozens of other TV viewing products out there or on the road. Until then, the new small line on the annual accounts – but powerful to transform its identity – does not tell investors much.

To contact the author of this story: Tara Lachapelle at tlachapelle@bloomberg.net

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the editors opinion or Bloomberg LP and its owners.

Tara Lachapelle is a Bloomberg Opinion column deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.

© 2019 Bloomberg L.P.


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