Disney posted a weak fiscal 2019 third quarter as both revenue and operating income fell short of consensus expectations. The firm consolidated both Fox Entertainment assets and Hulu in the quarter as it prepares for the transformational leap into direct to consumer with the launch of Disney+ in November. Management maintained its aggressive positioning in the DTC space by announcing a $12.99 bundle of Disney+, the ad-supported tier of Hulu, and ESPN+. We maintain our wide moat rating and our fair value estimate of $130.
Revenue for the third quarter was up 33% year over year to $20.2 billion, reflecting the Fox acquisition. The media networks segment grew 21% year over year as affiliate fee revenue was up 20% in the quarter as the 16% growth from Fox and 8% from higher rates more than offset the 2.5% decline in subscribers and the 1% negative impact of the new revenue recognition standard. Advertising revenue at broadcast networks was down over 4% as higher pricing was more than offset by lower impressions due to ratings. Ad revenue at the cable networks improved by 29% due to the Fox consolidation (18%), higher rates (6%), and more impressions (5%) as there were two more NBA Finals games this quarter.
The parks, experiences & consumer products segment remains a key growth driver with 7% year-over-year growth. Versus last year, total domestic attendance fell 3% but per capita spending grew by 10% and per room spending improved by 3%. Part of attendance decline was attributed to lower annual pass visits at Disneyland as the opening of new Star Wars land may have scared off some more regular customers. Revenue at the studio improved 33% as the slate in the quarter overcame a difficult comp at the box office and the Fox studio assets and slate were added in. Segment operating margin for the firm fell to 19.6% from 27.5% as the revenue growth was more than offset by the increased programming costs, continued investment in DTC, and consolidation of the Hulu losses.
We believe Disney is successfully transforming its business to deal with the ongoing evolution within the media industry.
ESPN remains the crown jewel of Disney's media networks segment, which now includes the recently acquired Fox cable entertainment channels like FX. ESPN dominates domestic sports television with its 24-hour programming on its growing number of networks. It profits from the highest affiliate fees per subscriber of any cable channel and generates revenue from advertisers interested in reaching adult males ages 18-49, a key demographic. The Disney Channel also benefits from attractive economics, as its programming consists of internally generated hits with Disney's vast library of feature films and animated characters. We expect the unique content on ESPN and Disney Channel will provide the firm with a softer landing than its peers as viewing transfers to an over-the-top world over the next decade.
Disney's other components rely on the world-class Disney brand, sought after by children and trusted by parents. Over the past decade, Disney has demonstrated its ability to monetize its characters and franchises across multiple platforms--movies, home video, merchandising, theme parks, and even musicals. This stable of animated franchises will continue to grow as more popular movies get released by the animated studio and Pixar. Disney has arranged the Marvel universe to create a series of interconnected films and product tie-ins. With the acquisition of Lucasfilm, the firm has positioned the Star Wars franchise in the same manner. Disney's theme parks and resorts are almost impossible to replicate, especially considering the tie-ins with its franchises and other business lines.
The firm's DTC efforts, Hulu, ESPN+, and Disney+, will benefit from the new content being created at Disney and Fox television and film studios as well as the deep libraries at the studios. We expect that Disney+ will leverage this content to again create a large, valuable subscriber base.
We assign Walt Disney a wide economic moat rating. Its media networks segment and collection of Disney-branded businesses have demonstrated strong pricing power in the past decade. We believe that the addition of the entertainment assets from Twenty-first Century Fox should help the firm continue to generate excess returns on capital despite operating in the increasingly competitive media marketplace.
One of our guiding premises in media is that the value of content continues to increase even as the distribution markets mutate. Despite changes in distribution, pay-television penetration remains at above 75% of U.S. households. Even without a pay-television subscription, most cord-cutters still consume video content, and many use antennas to capture signals, providing content creators with an additional avenue to generate revenue from these viewers. Over-the-top providers like Netflix and Amazon Prime are creating their own content and other large media firms like Disney and WarnerMedia are going direct to consumer. However, these services require deep libraries to gain and retain subscribers and many of them are looking for third-party content to supplement their own original content. Given the ongoing demand for content, we believe content creation is not a zero-sum game, as high-quality content will always find an outlet.
The ESPN network is the dominant player in U.S. sports entertainment. Its position and brand strength empower it to charge the highest subscriber fees of any cable network, which in turn generate sustainable profits. ESPN uses these profits to reinforce its position by acquiring long-term sports programming rights, including the NFL, the NBA, and college football and basketball. The ESPN brand has been extended to create sister channels (ESPN2, ESPN Classic, and SEC Network), the pre-eminent sports news website (ESPN.com), and an OTT streaming service (ESPN+). While the decline in subscribers at traditional distributors has negatively affected revenue for ESPN, the channel is a core network for every major OTT pay-television distributor despite its high fees. Given the importance of live sports to the pay-television bundle, we expect that the main ESPN channels will remain key components of any pay-television offering.
Disney also owns ABC, one of four major U.S. national broadcast networks and affiliated TV stations in eight markets (including six of the top 10 markets). While network ratings have declined over the past decade, the broadcast networks are the only outlet to reach almost all of the 120 million households in the U.S. Network ratings still outpace cable ratings and provide advertisers with one of the only remaining methods for quickly reaching a large number of consumers at once.
The media network component also includes the Disney Channel, one of two dominant cable networks for children, which allows Disney to introduce and extend its strong content portfolio. With the purchase of the Fox entertainment assets, Disney has enhanced its pay-television network lineup by adding multiple channels with strong appeal to adults. FX and FXX have created a platform for critically acclaimed original scripted shows, most of which are generated and owned by the Fox television studios, which Disney now owns.
The studio side of Disney has been strengthened via the Fox acquisition, particularly on the television production side. The Fox television studios currently produce or co-produce 70% of the prime-time slate on Fox. The Fox studios have placed a number of their programs on other broadcast and cable networks, including Modern Family on ABC and Homeland on Showtime. The critical acclaim of its studio-produced content, along with the studio's willingness to sell shows to the right distributor, created a virtuous cycle in which the creators of its hit shows had an incentive to launch new shows with the studio, as strong ratings attract other creators to the platform. We believe this cycle will be enhanced by the addition of more in-house platforms, including Hulu and Disney+.
While the addition of Fox Searchlight should help Disney garner more Oscar nominations, the film side of the firm is already running full bore, as Disney was the top-grossing studio in the U.S. for the last three years, with over $3 billion in box office receipts in 2016 and 2018. As recently as 2010, the firm's success at the box office depended heavily on Pixar. However, Disney now has six studios (Marvel, Pixar, Lucasfilm, Disney Animation, Disney Live Action, and 20th Century Fox) with the ability to generate blockbuster films annually. With the addition of Fox, Disney now owns 12 of the top 20 films in terms of worldwide box office grosses, with nine of the movies released in last five years.
Disney has mastered the process of monetizing its world-renowned characters and franchises across multiple platforms. The company has moved beyond the historical view of a brand that children recognize and parents trust by acquiring and creating new franchises and intellectual property. Recent success with the Pixar and Marvel franchises has helped to create new opportunities with adults who may have outgrown their attraction to the company's traditional characters. The acquisition of Lucasfilm added another avenue to remain engaged with children and adults. Disney uses the success of its filmed entertainment not only to drive Disney+ subscriptions, but also to create new experiences at its parks and resorts, merchandising, TV programming, and even Broadway shows. Each new franchise deepens the Disney library, which will continue to generate value over the years.
Our fair value estimate for Disney is $130, which reflects the impact of the acquired Fox assets. This estimate implies a price of approximately 18 times our fiscal 2019 earnings per share forecast and an enterprise value of roughly 12 times estimated fiscal 2019 adjusted EBITDA. We expect average annual top-line growth of about 10% through fiscal 2023 with annual organic growth of 5% and 4% for the Disney and Fox assets, respectively.
We project average annual sales growth from the media networks to be 3% (4% for affiliate fees and flat for advertising), as the loss of subscribers at ESPN and other pay TV channels will be offset by per-sub affiliate fee increases domestically and international growth. We also expect new bundles to provide a boost to the segment. We project 5% average annual sales growth during the next five years for the new parks, experiences, and consumer products segment. Investments that required heavy capital expenditures over the past few years are now bearing fruit, including the launch of Shanghai Disneyland in fiscal 2016. We forecast operating margin for the segment to exceed 25% by fiscal 2023.
We have modeled 4% average annual growth for the studio segment due to the strong slate of Marvel movies over the next few years and the growth in television, subscription VOD, and other distribution outlets as Disney+ ramps up. Disney is now reporting revenue on a gross basis, meaning the growth in studio revenue from Disney+ will be eliminated on a consolidated basis.
We estimate 22% annual growth for the new DTC and international segment as we are modeling strong subscriber growth for Disney+. We expect the service to hit 55 million paid subscribers by the end of fiscal 2023. This growth assumes a strong international rollout and continued low prices for the service in the U.S and internationally. We do not project that the segment will be profitable by the end of our five-year projection.
We project Disney's overall operating margin will improve to 24% in fiscal 2023 from 23% in fiscal 2019 as the losses at the DTC segment are offset by margin improvements at the studio and parks segments.
Disney's results could suffer if the company cannot adapt to the changing media landscape. Basic pay-television service rates have continued to increase, which could cause consumers to cancel their subscriptions or reduce their level of service. ESPN garners the highest affiliate fees of any basic cable channel, and a decrease in pay-TV penetration would slow revenue growth. The cost of sports rights may continue to skyrocket, putting pressure on margins. The company's ad-supported broadcast networks, along with the theme parks and consumer products, will suffer if the economy weakens. Making movies is a hit-or-miss business, which could result in big swings in profitability for the filmed entertainment segment.
While we rate Disney's stewardship of shareholder capital as Standard, we believe the current management team is in the upper end of the tier of its direct peers. Chairman and CEO Bob Iger began his tenure as CEO in October 2005 and chairman in March 2012 and is now scheduled to serve until June 2021 due to the acquisition of the Fox entertainment assets. The resignation of COO Tom Staggs in April 2016, formerly viewed as the successor to Iger, had thrown the previous orderly succession plan out the window. While we had believed that the board would look outside the company for the next CEO, Disney reorganized the firm in March 2018 and effectively created another internal two-man race to succeed Iger. The two contestants are Kevin Mayer, former chief strategy officer and now head of the newly created direct-to-consumer and international segment, and Bob Chapek, the head of the combined parks & resorts and consumer products segment. We believe that Meyer is the current frontrunner due to both his role in acquiring many of the firm's highly valued assets such as Pixar, Marvel Lucasfilm, and the Fox deal as well as his new position which places him at the forefront of helping the firm navigate the evolving media landscape.
After the loss of former CFO Jay Rasulo in 2015, the company drew on its deep executive bench to promote Christine McCarthy to CFO. McCarthy has a long tenure with the firm and significant experience in the finance function at Disney as the firm's treasurer.
Under Iger, Disney has embraced new technology and reinvigorated its commitment to high-quality content. He understood the importance of animation to the company early in his tenure, purchasing computer animation studio Pixar in 2006 and then resurrecting Disney's own studio. Iger also purchased two major content creators (Marvel and Lucasfilm) that expanded the demographics served by the company. Beyond Pixar, the company has made significant investment in new technology/distribution including buying Club Penguin (an MMO for children), Maker Studios (a network of YouTube channels), and its investment in BAMTech (a leader in online live-streaming). The Fox acquisition transforms the company by adding additional studios, international assets, and direct to consumer platforms. We believe Iger will remain on the lookout for M&A opportunities, specifically in new digital media, but we project that the deals will be on the smaller end of the spectrum.
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