Disney's ESPN Looks to an Online Future, as Cable Subscribers Decline
May 09 2017 - 7:15PM
Dow Jones News
By Ben Fritz
Faced with ongoing subscriber and viewership losses, Walt Disney
Co.'s ESPN is planning to launch digital subscription services
focused on particular sports, teams and regions.
Disney Chief Executive Robert Iger once again spent much of a
conference call with Wall Street analysts following the release of
financial results discussing the fate of ESPN. The sports channel
accounts for the majority of profits in the company's cable
business, which has lost momentum in the past few years while other
divisions are booming.
Overall, Disney on Tuesday reported revenue growth of 3% for the
three months ended April 1, to $13.34 billion, and an 11% increase
in net income to $2.39 billion compared with the same period a year
earlier.
Disney has announced plans to launch its first ESPN "over the
top" service, similar to Netflix, by the end of the year, but Mr.
Iger's comments on services tuned to the narrow interests of
particular sports fans indicate many more are in development.
The CEO said there are no current plans to offer a replica of
the ESPN cable channel online to those who don't subscribe to
cable, akin to Time Warner Inc.'s HBO Now, but conceded "there is
an inevitability to that."
ESPN recently laid off about 100 of its 8,000 employees,
including some high profile on-air talent, and is taking steps to
shake up its programming as viewership for non-live sports, such as
its signature SportsCenter program, are down.
Over the past five years, ESPN has gone from 99 million
subscribers to 87.44 million, according to Nielsen. Disney Chief
Financial Officer Christine McCarthy said the rate of cable
subscriber losses in the recent quarter increased by "less than
half a point" from the prior quarter," though she did not offer
specifics. Subscriber losses generated a three-percentage-point
decline in revenue from pay TV subscriptions, she noted, offset by
a seven-point increase from contractual rate increases.
Mr. Iger touted the presence of ESPN and other Disney networks
on new less expensive "skinny" TV packages from companies like Hulu
and Alphabet Inc.'s YouTube that are aimed at young,
price-sensitive consumers. But he conceded they aren't making up
for losses from traditional cable and satellite packages.
Disney's cable revenue grew 3% to $4.06 billion in the quarter,
while operating income fell 3% to $1.79 billion compared with the
same quarter a year ago. Decreases at ESPN, caused in part by
higher costs for the NBA and college football playoffs, were offset
by increases at the Disney Channels and Freeform.
The company's theme-parks unit saw the biggest revenue increase,
up 9% to $4.3 billion, and a healthy 20% increase in operating
income to $750 million.
Attendance at domestic parks was up 4% and Shanghai Disney
Resort, which opened last June, was profitable for the first time
last quarter and will break even in the fiscal year ending
September, said Ms. McCarthy. The company's first theme park in
mainland China will reach an internal goal of 10 million visitors
in the next few days, Mr. Iger said.
Despite difficult comparisons to last year, when "Star Wars: The
Force Awakens" was in theaters, revenue at Disney's movie studio
was down only 1% to $2.03 billion and operating income surged 21%
to $656 million. March's "Beauty and the Beast" was a blockbuster,
grossing more than $1.1 billion, and the studio benefited from
stronger titles on Blu-ray and video-on-demand, including "Moana"
and "Dr. Strange," than last year when it had only the Pixar
Animation Studios flop "The Good Dinosaur."
After closing at $112.07, Disney shares were down more than 2%
in after-hours trading.
Write to Ben Fritz at ben.fritz@wsj.com
(END) Dow Jones Newswires
May 09, 2017 19:00 ET (23:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Walt Disney (NYSE:DIS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Walt Disney (NYSE:DIS)
Historical Stock Chart
From Apr 2023 to Apr 2024