Walt Disney unveils $3bn buyback and lifts dividend ahead of activist battles

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Walt Disney handily beat Wall Street’s expectations in its latest quarterly earnings and unveiled shareholder-friendly measures including a $3bn share buyback and a 50 per cent dividend increase, as it prepares for proxy battles with activist shareholders.

The company emphasised its cost-cutting efforts, saying it had reduced expenses by $500mn in the first quarter. It predicted it would meet or exceed its target of $7.5bn in annualised savings this year.

Disney is facing proxy battles with Nelson Peltz’s Trian Partners and Blackwells Capital, which are seeking board seats and other changes aimed at boosting its share price. The stock jumped as much as 10.4 per cent to $109.50 on Thursday morning, taking its advance in 2024 to about 20 per cent.

Trian, which launched a proxy battle with Disney last year before abandoning it, issued a brief statement indicating it would continue to pursue its campaign. “We saw this movie last year and we didn’t like the ending,” the firm said.

Losses at the group’s streaming services, which include Disney+, Hulu and ESPN+, fell by $300mn compared with the previous quarter thanks to price rises and higher advertising revenue. The group said it expected to meet its target of reaching profitability in its streaming division by this autumn.

Bob Iger, chief executive, said the results proved Disney had “turned the corner and entered a new era”.

Iger made a series of announcements on Wednesday, including a $1.5bn investment in Epic Games, the group behind the popular game Fortnite*. The two companies will collaborate on building a “Disney universe” over the next couple of years, a move Iger said marks the Hollywood group’s largest shift into gaming.

“You can imagine the creation of short-form videos, or we may even use the platform to distribute some of our content,” he said. “There’ll be some opportunities to buy digital goods, maybe even at some point physical goods.”

Disney will also have an opportunity to cash in on Taylor Swift mania, as its flagship streaming service gains the exclusive streaming rights to her Eras Tour movie starting on March 15. The Disney version will feature four additional songs that were not in the cinematic release, which grossed more than $260mn.

Iger said Disney will launch a new version of its ESPN streaming service in 2025, which he described as a “very immersive” app that will feature integrated betting, enhanced statistics, fantasy sport leagues and ecommerce features.

The new ESPN app will be separate from the new sports streaming service that Disney announced this week along with Fox and Warner Bros, which will aggregate all of the games offered by their traditional TV networks. The as-yet unnamed service is expected to launch later this year.

Disney is also borrowing an idea from Netflix and cracking down on password sharing for its streaming services — a move that appears to have given a boost to Netflix’s subscriber numbers. Disney will begin contacting account holders suspected of improper sharing later this year and offer them the chance to add other accounts for an additional fee. The company does not expect to see results from the crackdown until the end of this year.

Disney’s earnings of $1.22 per share were well ahead of Wall Street forecasts of 98 cents partly because of cost cuts. Operating income at its theme park business rose 8 per cent to $3.1bn. But its movie business was hurt by weak cinematic releases including The Marvels and Wish.

*This story has been amended to correct a reference to games made by Epic