Disney warns of possible long-term distribution dispute with YouTube TV, shares fall 6%

Walt Disney announced Thursday that it is preparing for a potentially protracted battle with YouTube TV over the distribution of its cable channels, leaving investors worried about the prospects for its already declining TV business and sending shares down 6%.The company also missed quarterly revenue expectations as weakness in cable overshadowed strong growth in the company’s streaming and parks businesses, which delivered an earnings beat.

On a post-earnings call, Chief Financial Officer Hugh Johnston told analysts that Disney has built “a hedge” into its forecasts, assuming negotiations could continue.Disney’s content disappeared from YouTube TV – the fourth-largest pay-TV provider in the US with about 10 million subscribers – on October 30 in the latest dispute over carriage rights between the Alphabet unit and a major media company. NBCUniversal content also briefly disappeared from YouTube TV earlier this year due to a similar dispute.

Morgan Stanley analysts estimate that a 14-day YouTube TV blackout would cost Disney about $60 million in revenue. The tense discussions underscore YouTube TV’s rapid growth and Google’s vast financial resources, which give the company greater leverage in negotiations with media companies.

“The deal we proposed is equal to or better than what other major distributors have already agreed to,” Disney CEO Bob Iger said, referring to the talks with YouTube TV. “And while we have worked tirelessly to close this deal and put our channel back on the platform, it is also imperative that we ensure we agree to a deal that reflects the value we deliver, which both YouTube, by the way, and Alphabet have told us is greater than the value of any other provider.” BUYBACK, DIVIDEND BOOST

The media and entertainment giant also unveiled plans to increase its dividend by 50% and double its share buyback plan for the 2026 financial year.

It posted adjusted earnings per share of $1.11 for the fourth quarter ended in September, down 3% from a year earlier but 6 cents above the average LSEG estimate.

Profits at Disney’s theme parks rose, partly due to an expansion of the U.S. cruise ship business and growth at Disneyland Paris.

Profits from the streaming business rose 39% to $352 million. Disney said it added 12.5 million subscribers to Disney+ and Hulu during the quarter, for a total of 196 million.

A new distribution deal with cable and broadband provider Charter Communications has helped attract new streaming customers, Chief Financial Officer Hugh Johnston told Reuters.

Box office hit “Lilo & Stitch” debuted this quarter on Disney+ and was viewed 14.3 million times in its first five days, he said.

Disney has redeveloped itself to adapt to the industry-wide decline of traditional television and cable television. It has invested in new theme park attractions and cruise ships and worked to attract subscribers to its streaming services.

CEO Bob Iger made aggressive cost cuts when he returned to Disney in 2022. His current contract expires at the end of 2026 and Disney has said it will name Iger’s successor early next year.

TRADITIONAL TV DROP

Thursday’s earnings report reflected a continued decline in television rates and advertising revenue, but the company forecast confidence in the next two years.

Disney expects double-digit adjusted earnings per share for fiscal 2026, in line with its previous forecast. The company also said it expects double-digit adjusted earnings per share for fiscal 2027.

The company’s board announced a dividend of $1.50 per share, up from $1 per share, and doubled share buybacks to $7 billion in fiscal 2026.

In the just-ended quarter, Disney’s revenue of $22.5 billion was similar to a year ago, but fell short of analyst forecasts of $22.75 billion.

The entertainment division’s operating income fell by more than a third to $691 million after this year’s films failed to match the success of last year’s hits, “Inside Out 2” and “Deadpool & Wolverine.”

Profits at the traditional television unit fell 21% to $391 million, and ESPN revenues also fell.

The experiences division, which includes theme parks, posted operating income of $1.88 billion, up 13% from a year ago. Some of the growth came from more passenger days on Disney cruise ships, the company said.

“This was another year of great progress as we strengthened the company by unlocking the value of our creative and brand assets and continuing to make meaningful progress in our direct-to-consumer business,” Iger said in a statement.