Disney Moves To Bolster ESPN -- WSJ
May 10 2017 - 3:02AM
Dow Jones News
By Ben Fritz
Faced with 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 on Tuesday 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 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 had announced plans to launch this year its first ESPN
"over the top" service, similar to Netflix, that will include
sports not on the linear network like baseball. 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 didn't 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 its fiscal
second quarter, while operating income fell 3% from a year earlier
to $1.79 billion. 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." Last year 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 10, 2017 02:47 ET (06:47 GMT)
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