Walt Disney Co (DIS.N) has reported a steeper earnings decline than Wall Street anticipated even as the company poured money into its planned streaming media.
Reports say the company has began folding in assets purchased from Twenty-First Century Fox.
Shares of Disney, which had risen 27% this year and hit an all-time high last week, dropped as much as 5% in after-hours trading to $135.
Excluding certain items, Disney earned $1.35 per share for the quarter that ended in June, below average analyst estimates of $1.75 per share.
Disney – the owner of ESPN, a movie studio and theme parks, is investing heavily in digital media platforms to challenge the dominance of Netflix Inc (NFLX.O).
Its biggest digital bet, a family-friendly subscription service called Disney+, is scheduled to debut in November. Shows aimed at adults will be concentrated on Hulu, which Disney now controls.
The direct-to-consumer and international unit reported an operating loss of $553 million from April to June, wider than the $441 million loss analysts were expecting, and up from a $168 million loss from a year earlier.
Costs piled up from consolidation of Hulu and spending on Disney+ and the ESPN+ streaming service, Disney said.
Future digital investments will lead to a roughly $900 million operating loss in the direct-to-consumer unit in the quarter that ends in September, the company said, compared with expectations of a $593 million loss.
For the just-ended quarter, executives said Fox’s film studio performed worse than expected while the costs to broadcast cricket through Fox’s Star India were higher than anticipated.
Disney Chief Executive Bob Iger said the company was focused on integrating the Fox film and TV assets and using them with Disney’s businesses to move quickly into streaming video.