Disney rebounds after revenue miss and ESPN concerns initially sink stock

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Disney’s stock fought back and then some in after-hour trading on Thursday after a somewhat disappointing quarterly report initially sent shares down around 3 percent.

Disney reported total revenues of $13.1 billion and earnings per share of $1.20 for the fourth quarter, both of which fell short of Wall Street estimates.

Once again, it was Disney’s Media Networks group, which houses ESPN, that led the revenue decline. Overall, Media Networks revenue fell 3 percent to $5.7 billion as cable networks revenue dropped 8 percent to $3.96 billion. Operating income for the cable networks segment fell 13 percent to $1.4 billion as ESPN and Disney Channels both underperformed.


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ESPN’s revenues were hurt by lower advertising and affiliate revenue along with higher programming and production costs, while the Disney Channels’ troubles were attributed a to decrease in affiliate revenue and program sales.

But Disney CEO Bob Iger stayed upbeat about ESPN during Thursday’s earnings call and said ESPN’s inclusion in live streaming services like DirecTV Now and Hulu’s product will help get the sports network in front of a millennial age group that has largely avoided traditional pay TV.

RELATED: Nielsen stands by report, says ESPN lost 621K subs in October

The chance to attract a fresh audience could help ESPN reverse the subscriber losses that has plagued the network. In October, Nielsen reported that ESPN lost 621,000 subscribers in a month, numbers which ESPN heatedly disputed and said do not include viewers from new IP-based TV services.

“This most recent snapshot from Nielsen is a historic anomaly for the industry and inconsistent with much more moderated trends observed by other respected third party analysts,” ESPN said in a statement. “It also does not measure DMVPDs and other new distributors and we hope to work with Nielsen to capture this growing market in future reports.”

While Disney’s cable networks faltered, operating income for Disney’s broadcasting segment increased $60 million to $224 million on the strength of more lucrative program sales and an increase in affiliate revenue. The segment got a boost from affiliate revenue growth on higher contractual rates as well as an increase in program sales from titles like Luke Cage, Quantico and Golden Girls.

“We remain confident that Disney will continue to deliver strong growth over the long-term as we further strengthen our brands and franchises, our technological capabilities, and our international presence,” said Iger in a statement.


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