'Star Wars' drives Disney to record quarterly earnings

Walt Disney Co. late Tuesday said it posted its biggest quarterly earnings ever in the first quarter on the global success of 'Star Wars: The Force Awakens."

The company reported its earnings jumped to $2.88 billion, or $1.73 a share, from $2.18 billion, or $1.27 a share, in the same quarter last year. Excluding items, the company would have earned $1.63 a share. Revenue grew 14% to $15.24 billion from $13.39 billion a year earlier.

Analysts surveyed by FactSet had forecast adjusted earnings of $1.45 a share on revenue of $14.79 billion. Its studio entertainment business led the surge in operating income while media networks saw its operating income drop 6%. Despite the robust results, shares of Disney fell 1.9% in after-hours trade.

ESPN takes the edge off "Star Wars" success at Disney

Feb 9 (Reuters) - A drop in profit at Walt Disney Co's cable networks unnerved investors despite jumps in overall quarterly income and revenue, driven by the blockbuster release of "Star Wars: The Force Awakens".

The media networks unit that includes sports network ESPN, the Disney Channels and ABC recorded a 5.6 percent decline in operating income to $1.41 billion, due mainly to higher programming costs at ESPN, which offset an increase in advertising revenue.

Disney faces declining subscribers at ESPN as viewers switch to watching sports games online and cut TV cable subscriptions.

That took the shine off a blockbuster launch for "The Force Awakens", the first "Star Wars" movie produced by Disney after it bought Lucasfilm from creator George Lucas in 2012 for $4 billion.

2nd Quarter March 2016
Consensus: $1.40
Revenue: $13.21 Bil

The company reported adjusted earnings of $1.36 per share on $12.97 billion in revenue for its fiscal 2016 second quarter.

The media company, which reports after Tuesday's closing bell, is expected to show adjusted earnings of $1.61 per share, according to the Thompson Reuters consensus. Revenue for the fiscal 2016 third quarter is estimated at $14.152 billion.

the company posted third-quarter earnings of $1.62 per share on $14.28 billion in revenue. Analysts expected disney to post earnings of $1.61 per share on $14.15 billion in revenue, according to a thomson reuters consensus estimate.

Parks and Resorts

Parks and Resorts revenues for the quarter increased 6% to $4.4 billion and segment operating income increased 8% to $994 million. Operating income growth for the quarter was due to an increase at our domestic operations, partially offset by a decrease at our international operations. Results were adversely impacted by the absence of the Easter holiday, which occurred in the third quarter of the prior year compared to the second quarter of the current year.

Higher operating income at our domestic operations was due to guest spending growth and lower costs, partially offset by lower volumes. The increase in guest spending was driven by higher average ticket prices at our theme parks and cruise line. Lower costs reflected decreases in labor and marketing costs from efficiency initiatives. Costs also benefited from lower infrastructure costs due to timing and a decrease in fuel costs. These decreases were partially offset by higher depreciation, labor and other cost inflation and costs associated with new attractions. The decrease in volumes was due to lower attendance, partially offset by higher occupied room nights.

Lower operating income at our international operations was due to higher pre-opening costs at Shanghai Disney Resort and lower attendance and higher operating costs at Disneyland Paris. These decreases were partially offset by cost efficiency initiatives as well as higher volumes and guest spending at Hong Kong Disneyland Resort.

The media titan posted adjusted earnings of $1.10 per share on revenue of $13.14 billion for its fiscal fourth quarter. Revenue slid 3 percent from the prior year, which Disney said included an extra week of operations.


Analysts expected Disney to report earnings of about $1.16 a share on $13.52 billion in revenue, according to a consensus estimate from Thomson Reuters.

Walt Disney — The stock was upgraded to "overweight" from "equal-weight" at Morgan Stanley, which also raised the price target to $124 per share from $101. Morgan Stanley thinks ESPN has the potential to accelerate revenue growth against a more aggressively managed cost base.

ESPN Tightens Its Belt as Pressure on It Mounts

July 9, 2015

Sports-TV powerhouse ESPN, a profit machine that has long towered over the media landscape, is showing signs of stress as the pay-TV industry goes through an unprecedented period of upheaval.

A decline in subscribers as customers trim their cable bills, coupled with rising content costs and increased competition, has ESPN in belt-tightening mode, people familiar with the situation say.

The company, majority owned by Walt Disney Co., has lost 3.2 million subscribers in a little over a year, according to Nielsen data, as people have “cut the cord” by dropping their cable-TV subscriptions or downgraded to cheaper, slimmed-down TV packages devoid of expensive sports channels like ESPN.

At the same time, the prices ESPN pays for the rights to show games are ballooning. Rivals including 21st Century Fox Inc.’s Fox Sports and Comcast Corp.’s NBC are aggressively pursuing sports properties to feed their own outlets, which is also driving up prices.

Last year, ESPN agreed as part of a renewal deal with the National Basketball Association to triple its average annual fees from $485 million to about $1.47 billion, people familiar with the deal said.

ESPN sees talent as one area where it can control its costs, and it has been taking a hard line in negotiations.

On Wednesday, the company said it was parting ways with star host Keith Olbermann. That followed the exit in May of Bill Simmons, another big name. While Mr. Olbermann’s tendency to make controversial statements sometimes landed him in hot water with ESPN and some of its business partners, including the National Football League, the decision was a financial one, a person with knowledge of the decision said.

Other ESPN talent likely facing tough negotiations down the road includes “Monday Night Football” anchor Mike Tirico, reporters Michelle Beadle and Adam Schefter, and radio-host Colin Cowherd, people close to them said.

“We are constantly looking at the cost side of our business and calibrating that against our expectations for the future,” said ESPN Executive Vice President of Administration Ed Durso. “Regardless of what the future holds, we’re incredibly well-positioned to adapt.”

The stakes are high for Disney. ESPN will contribute roughly 25% of the company’s operating profit this year, according to Nomura Securities. ESPN’s fortunes are being closely watched in the media world as cord-cutting picks up and consumers gravitate to streaming services.

Sports has long been viewed as the glue holding the pay-TV bundle together, providing leverage for media giants like Disney to distribute wider groups of channels and secure higher fees from pay-TV operators.

Since July 2011, ESPN’s reach into American homes has dropped 7.2%, from more than 100 million households—roughly the size of the total U.S. pay-TV market—to 92.9 million households, according to Nielsen data.

Viewership of SportsCenter, its marquee and high-margin sports-news show, has sagged since September, due in part to the fact that younger consumers are increasingly finding sports news at their fingertips on smartphone apps.

To be sure, ESPN continues to trounce other cable channels in ratings, garnering an average of 2.4 million prime-time viewers tuning in live or within seven days since last September.

The financial stakes are especially high for ESPN because it earns the most carriage fees of any TV channel, about $6.61 a month per subscriber, according to SNL Kagan.

In response to the pressures, ESPN has been scaling back ambitious initiatives. One such move was its decision to cancel plans to move its popular morning “Mike & Mike” radio and TV show from the company’s Bristol, Conn., headquarters to the ABC studio in New York City that houses “Good Morning America.”

ESPN announced the idea with great fanfare in May but then put it on hold a few weeks ago. People close to ESPN say the cost associated with relocating to New York was a major factor.

As it trims costs, ESPN is also looking for new ways to boost revenue. In previous years, Disney’s ABC network received four minutes of time to promote its new shows for the fall during each NBA finals game it aired. This year, ESPN, which manages the NBA rights for Disney, cut that amount by about 75% so that it could sell more ads, people with knowledge of the matter said, a move that angered ABC executives.

Disney’s concerns about ESPN’s subscriber losses have shown up in its deal-making as it tries to get distribution on new online services that compete with traditional pay TV.

When Disney struck a deal to put channels on Dish Network Corp.’s Sling TV service, it negotiated the right to terminate the deal if ESPN lost three million Nielsen households after May 2014—a threshold that has now been crossed, according to people familiar with the matter.

Other factors could play into Disney exercising that right, including if Sling TV attracts more than two million subscribers, though that benchmark is still a ways off, the people said.

ESPN has been an early adopter of new digital business models and has built a huge Web and mobile audience for its news content—an asset as the TV model comes under pressure. But it has moved cautiously in online video, making sure any new product safeguards its lucrative pay-TV business.

Some networks like HBO and CBS have launched their own stand-alone online video services to target customers that don’t want to buy a cable-TV subscription. ESPN has so far shied away from that route, and it would face some complications in that endeavor.

If ESPN offers its channel as a direct-to-consumer streaming service, some pay-TV operators have the contractual right to boot ESPN out of their most widely-sold channel packages and sell it a la carte, according to people familiar with the matter.

ESPN would have to charge about $30 a month per customer in an over-the-top offering to make the same money using that model, analysts say. But those distributors would have the right to undercut ESPN in their retail pricing, the people said.

To be sure, there are no signs ESPN wants to offer a stand-alone Web version of itself to consumers anytime soon.

“As long as the current distribution ecosystem, or the one that seems to be emerging, continues to create value for us, then we’ll rely on it to distribute our product,” Disney Chief Executive Bob Iger said on a May earnings conference call.

But he added that there is “some development under way” to create products directly for consumers.

Disney is investing $1 billion in streaming tech and will launch a streaming sports network — but it won’t include ESPN

If cord-cutting ever gets bad, Disney now has an easier way to go direct to consumer.

Aug 9, 2016,

Disney is buying a one-third stake in streaming video company BAM Tech for $1 billion and will eventually launch what it calls an ESPN-branded subscription streaming service that — here’s the important part — won’t include ESPN.

The deal values BAM Tech, backed by Major League Baseball, at $3 billion.

We told you about a potential deal between the two earlier this year, and now it’s official. The company also said the investment gives it the option to buy a majority stake down the road, which shows it’s pretty serious about streaming video.

Disney already sells some of its channels, including ESPN, to online streaming services like Dish’s Sling. But with its new investment Disney can stream stuff on its own and plans to sell a bunch of ESPN-type channels in a new subscription video service at some point in the future.

Crucially, it won’t include regular ESPN since that’s the channel that makes the most money for Disney, and selling it directly to consumers would hurt its standing with the cable and satellite distributors that already pay Disney a lot of money to carry the network.

But by owning a piece of the tech, Disney has an easy way to sell more of its content directly to consumers, and if cord-cutting ever gets really bad, it can include ESPN in the mix.