Disney's TV Revs Up, ESPN Hit With Subscriber, Programming Woes

Walt Disney tallied double-digit percentage gains for revenue and net income in its fiscal first quarter -- but the stock market did not like it.

Disney revenues grew 14% to $15.2 billion in the fiscal first-quarter period, with net income gaining 32% to $2.9 billion -- both totals that beat expectations.

While Disney’s stock closed slightly 0.2% to $92.32, after-market trading was down over 4%. For months, there have been concerns over some declining ESPN subscribers, which hurt Disney’s stock price and affected other media companies.

Barton Crockett, media analyst for FBR Capital Markets, speaking on CNBC Tuesday, said this has now seemingly resulted in only modest cable network affiliate fee revenue growth for the period of 3.5%.



But in its earnings call, Bob Iger, chairman/chief executive officer of Walt Disney Company, said: 

“In the last couple of months, we have actually seen an uptick in ESPN [subscribers], which is encouraging. We are also pleased with what we are hearing from Dish about the response for Sling TV -- a light package that includes ESPN. The service is growing nicely, proving attractive to young consumers in particular.”

Media networks made strong revenue gains for Disney during the period: Cable networks were up 9% to $4.5 billion; the ABC broadcast network and its stations and added 7% to $1.8 billion. However, ABC witnessed lower ratings and its TV stations had lower political advertising revenues during the quarter.

While all its networks gained 8% to $6.3 billion in revenue overall, it suffered, with declining operating income down 6% to $1.4 billion -- the only Disney business unit to see declining operating incomes.

In particular, ESPN suffered because of higher programming costs, despite some gains in advertising and affiliate revenue. Six College Football Playoff games aired in the period -- versus Disney's fiscal second quarter of a year ago. ESPN benefited from higher advertising revenue for the playoff games -- more units sold and higher rates.

Broadcasting benefited from higher advertising and affiliate revenue, as well as program sales -- but its operating income suffered due to higher programming costs and “equity losses from Hulu.”

Disney is a one-third partner in the subscription video-on-demand service. 21st Century Fox and Comcast Corp. are the other equal partners.

The ABC network witnessed lower ratings, and its TV stations had lower political advertising revenues during the quarter.

Disney’s Parks and Resorts were up 9% to $4.3 billion from higher U.S. parks business, while its consumer products & interactive unit climbed 8% to $1.9 billion, with “Star Wars” license products contributing strongly.

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