Disney revenue better than expected as it starts climbing out of Covid-19

 By Lisa Richwine and Akanksha Rana

(Reuters) - Walt Disney Co on Thursday reported quarterly revenue that was better than Wall Street expected as live sports returned to ESPN and the company's theme parks began recovering from shutdowns due to the coronavirus pandemic.

Overall revenue fell 23% to $14.71 billion (£11.22 billion) in the quarter, above analysts' average estimate of about $14.2 billion.

Disney's adjusted loss per share, excluding one-time items of 20 cents, also beat Wall Street expectations of a more drastic 70 cents per share loss.

Disney shares jumped 5.6% to $143.12 in after-hours trading.

One year after it launched the Disney+ online streaming subscription to compete with Netflix Inc , Disney said the service had signed up 73.7 million subscribers. Hulu had 36.6 million customers and ESPN+ had 10.3 million.

Disney+ faces a test, however, as a one-year free trial offer for millions of Verizon Communications Inc customers expired on Thursday. Disney aims to gain new signups with the release of a "Star Wars" Lego holiday special this month, Pixar movie "Soul" at Christmas, and Marvel series "WandaVision" in January.

Disney's businesses outside of streaming have been hammered by the global COVID-19 pandemic. The outbreak forced the company to close theme parks, suspend cruises and delay movie releases, and it left ESPN without major sports broadcasts. Disney said the pandemic reduced profit at its parks units by $2.4 billion.

"Even with the disruption caused by COVID-19, we've been able to effectively manage our businesses while also taking bold, deliberate steps to position our company for greater long-term growth," Chief Executive Bob Chapek said in a statement.

The parks have started to welcome back visitors and sports leagues have resumed play, though a rise in cases in Europe and the United States threatens that progress.

During the quarter that ended in September, most of Disney's theme parks, including its flagship resort in Florida, had reopened but with limited attendance, mask requirements and other safeguards. The parks and consumer products business lost $1.1 billion in operating income, less than analysts expected.

Disneyland in California has been shut since March, and Disneyland Paris was forced to close for a second time in October as virus cases spiked in France.

At the media networks segment, the return of major sports helped boost ESPN. The unit reported $1.9 billion in operating income, up 5% from a year earlier.

Profit at the movie studio slumped 61% to $419 million, as the company delayed major movie releases until 2021 and many theaters remained closed.

Disney in October announced a restructuring designed to put more emphasis on streaming as the company's future. The streaming unit, known as direct-to-consumer and international, has been losing money as it invests to build Disney+. For the quarter that ended in September, the division lost $580 million, less than the $1.0 billion that analysts expected.

Disney streaming platform grapples with password leaks, despite success

Some customers who signed up for Walt Disney Co’s new Disney+ streaming service have seen their usernames and passwords sold online to third parties and have been locked out of their newly opened accounts.

Disney said its system hasn’t been hacked and that it’s working to quickly address the issue. It’s possible that hackers obtained the names and passwords from data breaches at other companies.

“Disney takes the privacy and security of our users’ data very seriously, and there is no indication of a security breach on Disney+,” the company said in a statement.

Disney+ is the company’s effort to build a direct connection to consumers, as many people shift to watching movies and shows on demand rather than on cable and satellite TV. The $7-a-month service launched a week ago and quickly signed up more than 10 million customers, a number far exceeding predictions.

Still, the debut was marred by many complaints from customers who couldn’t log on or had trouble watching programs. But the number of gripes collected by the website Downdetector has dropped sharply over the past week and now amounts to just a few dozen.

Growing Exposure

Speaking at the Code Media conference in Los Angeles on Tuesday, Disney’s direct-to-consumer chief blamed the initial troubles on faulty coding in the app that the company is working to fix. Kevin Mayer said Disney executives were “very surprised” by the number of people who subscribed.

The sign-up process was complicated, he said, because some customers already had subscriptions to Disney services such as Hulu and wanted to add the new one. Many customers also forgot they already has Disney accounts.

“Not only was it huge demand, but the complexity,” Mayer said. “If you were a current subscriber, how does it work? Those were legitimate questions.”

While Disney has long collected customers’ names and passwords for its theme parks and online games, the expansion into online video on a global basis brings the potential for more technology snafus.

ZDNet reported over the weekend that Disney+ users’ accounts were being put up for sale on hacking forums within hours of the service’s launch at prices of $3 to $11 each. Some customers reported they had used old passwords, but others said they hadn’t, according to the website.

While there may be few thousand compromised Disney accounts, that’s small compared with the hundreds of thousands of usernames and passwords on the black market hijacked from platforms like Hulu, Netflix and HBO, said Andrei Barysevich, chief executive officer and co-founder of the security firm Gemini Advisory.

‘Very Effective’

Reusing names and password combinations from previous attacks at other sites can be a “very effective method” for hackers, he said.

“This is one of the biggest problems, not just streaming services, but pretty much every e-commerce business has been battling for the last couple of years, because there’s an abundance of compromised emails and passwords on the dark web,” Barysevich said.

At Code Media, a conference for media executives, operators of rival services praised the Disney+ launch. David Nevins, chief creative officer at CBS Corp., called the sign-ups “impressive,” while AT&T Inc. President John Stankey said that while Disney+ “was off to a good start,” keeping customers happy and subscribed will be an ongoing issue.

“How many of the 10 million customers are there six months from now?” Stankey asked. “It’s managing churn.”

Spider-Man's future up in the air as Sony-Disney spat continues

A dispute between Walt Disney Co. and Sony Corp. threatens to end their co-production of “Spider-Man” films, according to people familiar with the situation, putting the future of one of Marvel’s most beloved characters up in the air.

The two sides haven’t been able to agree on new terms for their partnership, said the people, who asked not to be identified because the discussions are private. Talks are ongoing, one of the people said.

Sony holds the film rights to the popular Marvel character, even though Disney acquired Marvel Studios for $4 billion in 2009.

A falling-out between two of Hollywood’s biggest studios would mean Marvel President Kevin Feige won’t be lending his touch to future Spider-Man films, and the character won’t appear in Disney’s Marvel films -- a series dubbed the Marvel Cinematic Universe, or MCU, that’s generated more than $22.5 billion globally.

Disney has been requesting a 50 per cent share of profits in the films going forward. Sony wanted to keep the current arrangement, in which Disney gets a 5 per cent share of box-office revenue, according to the Deadline website, which reported earlier on the dispute.

Representatives of Disney and Sony didn’t return calls seeking comment.

The two Hollywood giants agreed in 2015 to work together on films featuring the web-slinging superhero after several of Sony’s Spider-Man films underperformed. The first feature in their collaboration, 2017’s “Spider-Man: Homecoming,” captured $880 million in ticket sales worldwide, the best performance of the franchise up until then. A follow-up, this year’s “Spider-Man: Far From Home,” grossed $1.1 billion, a record for the series and for Sony.

Spider-Man, played by Tom Holland, also was featured in MCU films such as this year’s “Avengers: Endgame,” the highest-grossing film of all time.