Tags: Disney | ESPN | Viewers | Costs

Disney Dogged by ESPN Woes, With Less Viewers and High Costs

Image: Disney Dogged by ESPN Woes, With Less Viewers and High Costs
Radu Razvan Gheorghe/DreamsTime

Wednesday, 10 May 2017 09:49 AM

Walt Disney Co. failed to assuage investor concern about its cable division, saying profit in the business slumped last quarter as ESPN continued to lose subscribers and spend more to televise games.

Sales in the cable division totaled $4.06 billion, trailing the $4.2 billion average of analysts’ estimates. The unit’s profit slid 3 percent, the company said, a reflection of higher expenses for NBA games and college football. Disney shares fell in late trading.

The results show Disney struggling to get a handle on the troubles at its largest business -- TV programming. The owner of ESPN and ABC has seen ratings slide as audiences watch more video online, while sports leagues keep demanding more money. The company is paying $600 million more for rights to National Basketball Association games alone, and a shift in college football schedules also lifted expenses.

The cable unit’s woes overshadowed positive results in other divisions. The entertainment company said Tuesday total profit rose to $1.50 a share in the fiscal second quarter ended April 1, beating the $1.41-a-share average of analysts’ estimates. Sales at the Burbank, California-based company rose 3 percent to $13.3 billion, slightly behind expectations.

“Although we think that Disney can probably grow faster than most of its peers in the long run because of its global studio and parks businesses, it is also more weighted down by tepid growth and longer-term margin compression at media networks,” Brian Wieser, an analyst at Pivotal Research Group LLC, wrote in a note after results came out.

Disney shares fell 2.1 percent to $109.75 in early trading Wednesday. The stock rose 0.6 percent to $112.06 at the close in New York Tuesday.

Problems in the cable division previously led Disney to warn of modest profit growth this year. Ad sales have slumped at competitors including Time Warner Inc. and Viacom Inc. ESPN’s ad sales rose 5 percent in the quarter, though they would have declined 1 percent if not for the addition of three college football bowl games that didn’t air in the same period last year. Last month, the network eliminated about 100 positions including many on-air personalities.

ABC’s Profit

Profit at Disney’s ABC broadcast division rose 14 percent, fueled by fees from pay-TV providers, sales of programs to other outlets and lower marketing costs. Ad sales at Disney’s broadcast division fell 3.3 percent to $1 billion, according to a filing.

Chief Executive Officer Robert Iger said the company was taking a number of steps to improve ESPN viewership and manage its business in the shifting media landscape. Fans can receive customized scores and video clips about their favorite teams on ESPN’s mobile app, he said. An online-only version of the company’s sports offerings will be introduced this year.

“The pessimism about ESPN is highly exaggerated,” Iger said in an interview Tuesday on Bloomberg TV.

Disney’s namesake theme parks were buoyed by the new Shanghai Disney Resort, which opened on the Chinese mainland last June. Profit rose 20 percent to $750 million in the division, which is expected to account for as much as two-thirds of Disney’s earnings growth through 2021 as new attractions draw more guests, according to UBS. The company’s newest offering, Pandora -- the World of Avatar, opens May 27 at Disney’s Animal Kingdom in Orlando, Florida.

Film profit grew 21 percent to $656 million, driven by “Beauty and the Beast,” the company’s only release in the quarter. The live-action remake of the company’s 1991 animated hit has grossed $1.19 billion in theaters worldwide since its March 17 release, underscoring the success of the company’s strategy of redoing past films for contemporary audiences. Revenue for the studio was down 1 percent.

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Revenue for quarter is slightly below analysts’ projections; Sports network’s ad sales fall, excluding extra college games
Disney, ESPN, Viewers, Costs
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2017-49-10
Wednesday, 10 May 2017 09:49 AM
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