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Disney's $4 billion purchase of Lucasfilm and the Star Wars franchise five years ago is the deal that keeps on giving — and costing, given all the additional investment in store. The entertainment giant clearly sees a future full of big returns on that investment.

The Walt Disney Co. has galactic plans for its Star Wars franchise, and those are coming with a big bill.

During an earnings call this week, executives said the company would increase capital spending for the current fiscal year by $1 billion.

“A lot of that spend is going into the completion of the two Star Wars lands, and we’re also completing Toy Story land in Orlando and there’s other initiatives that are in process around the globe,” Chief Financial Officer Christine McCarthy told analysts.

Total capital spending in fiscal 2017, which ended Sept. 30, was a little more than $3.6 billion — $3.2 billion of which went to parks and resorts. That consolidated amount was down from $4.8 billion in fiscal 2016, when investments were higher at Shanghai Disney Resort and Hong Kong Disneyland.

Company-wide, Disney reported lower revenue and profit for the fourth fiscal quarter. Revenue fell 3 percent to $12.8 billion, while net income dipped 1 percent to $1.75 billion. The parks and resorts segment, however, was a standout: Revenues jumped 6 percent to $4.7 billion, and segment operating income was $746 million, a 7 percent increase.

Operating income for domestic parks, resorts, and Disney Cruise Line was down 6 percent because results were lower at Walt Disney World in Orlando. Parks had to close for two days because of Hurricane Irma, which also forced the cancellation of three Disney Cruise Line sailings and the shortening of two others. The company estimated the total impact of the hurricane was about $100 million in operating income.

Domestic attendance was still up, by 2 percent, in part due to new attractions, including Avatar Flight of Passage at Disney’s Animal Kingdom and the Guardians of the Galaxy — Mission: Breakout ride at Disney California Adventure.

Growth in operating income was driven by international parks, including Disneyland Paris, where a 25th anniversary celebration brought in more guests. “A more favorable tourism environment” also helped, McCarthy said.

Shanghai Disney, which opened in June of 2016, also saw higher attendance and outperformed the company’s earlier projections.

“I’m pleased to note that Shanghai Disney Resort generated positive operating income during its first full fiscal year of operations, which comfortably surpassed our expectations of breakeven from its first year,” McCarthy said.

CEO Robert Iger said positive results in parks around the world including Shanghai, Hong Kong, Paris, and Tokyo, show that the company has “ample opportunity to continue to invest and continue to expand those businesses.”

In the U.S., the Star Wars lands are set to open at the Orlando and California resorts in 2019.

And another announcement revealed that Disney will keep making new Star Wars movies way beyond that. Iger said  the company just closed a deal with Rian Johnson, who directed the installment that will be released in December, to develop an entirely new Star Wars trilogy. No release dates were announced, but those will be in addition to the film coming out this year, a Han Solo-specific movie next year, and Episode Nine in 2019.

“No other company in entertainment today is better equipped to meet the challenges of the changing world or better positioned for continued growth thanks to our collection of brands, our strong franchises and our unique ability to leverage IP across our entire company to maximize value and create new opportunities,” Iger said. “We’ll continue to invest for the future and take the smart risks required to keep moving forward.”


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Tags: disney, earnings, theme parks

Photo credit: The Walt Disney Co. will increase its capital spending by $1 billion next year, due in large part to new Star Wars lands that are under construction. The company revealed a model and renderings of the lands this summer at D23 Expo, a fan event. Joshua Sudock / Disney Parks

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