December 9, 2019

Media Decoder Blog: Costs at ESPN Depress Disney Profits

LOS ANGELES – Higher costs at ESPN and lower DVD sales resulted in a 6 percent decline in quarterly profit at Disney, the company said on Tuesday. But Disney’s video game and Web unit finally swung to the black and the conglomerate steered attention toward potential future growth fueled by the “Star Wars” franchise.

Robert A. Iger, chairman and chief executive of the Walt Disney Company, speaking on CNBC shortly after the market’s close, said that Disney’s newly acquired Lucasfilm division would produce “a few” additional movies in the coming years that feature characters and stories from the “Star Wars” universe.

Lawrence Kasdan, known for his work on “The Empire Strikes Back” and “Return of the Jedi,” and Simon Kinberg, a screenwriter whose credits include “Sherlock Holmes,” are both working on the “stand-alone” films, Mr. Iger said. Disney has previously announced plans to make installments seven, eight and nine in the “Star Wars” saga over a six-year period starting in 2015.

Investors and analysts had been expecting a bumpy quarter. Disney made the unusual decision in November to note publicly some of its upcoming difficulties, like higher ESPN programming costs and a calendar quirk that would hurt theme parks by moving part of the New Year’s holiday into a different quarter.

Even so, Disney beat Wall Street estimates of 76 cents a share. For the quarter, which ended on Dec. 29, Disney reported net income of $1.38 billion, or 77 cents a share, down from $1.46 billion, or 80 cents a share, in the same quarter a year earlier. Excluding one-time charges and gains, Disney reported 79 cents a share for the most recent quarter, the first in the company’s fiscal year.

Revenue climbed 5 percent, to $11.3 billion.

ESPN had a significant impact on Disney’s quarter, with programming expenses increasing for football and basketball. Those costs held back results for Disney’s media networks unit, which houses the cable sports behemoth; operating income there increased a tepid 2 percent, to $1.21 billion. The growth came from Disney Channel, ABC Family and higher ad sales at the ABC broadcast network.

The biggest drag on Disney’s quarter, however, came from Walt Disney Studios, which reported a 43 percent drop in operating income, to $234 million. The problem involved comparability: DVD sales for “Brave” and “Cinderella” were slight compared with disc releases in the same period a year earlier, notably “Cars 2” and “The Lion King.”

Theme parks continued to be a bright spot. Operating income in Disney’s parks and resorts division, watched as a barometer of the broader economy, increased 4 percent in the most recent quarter, to $577 million. Higher attendance at Disneyland Resort in California, where a “Cars”-themed area opened last summer, contributed to the growth, as did strong bookings on the company’s Fantasy cruise ship.

Interactive media, a business unit that includes video games and Disney.com, swung to an operating profit of $9 million after 16 consecutive quarters of losses. The company cited growth from Disney-branded cellphones in Japan as part of the reason.

Article source: http://mediadecoder.blogs.nytimes.com/2013/02/05/costs-at-espn-depress-disney-profits/?partner=rss&emc=rss

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