Disney profits soar 19% despite ESPN deals eating into cable performance

Despite softness in one of pay-TV's most powerful programming engines, the Walt Disney Company reported a 19 percent uptick in fourth-quarter profits Wednesday.

The conglomerate was driven by consumer products sales and its motion picture division, which are still benefiting from the 2013 animated film sensation Frozen. And despite its Anaheim, Calif., Disneyland theme park being the nexus for a ongoing resurgence of measles, the overall parks business performed nicely for Disney, as well.

Overall, the company reported net income for the quarter ending Dec. 27 of $2.18 billion on revenue of $12.87 billion.

Operating income at the conglomerate's cable networks, which include ESPN and Disney Channel, declined 2 percent to $1.26 billion, despite an 11 percent uptick in revenue. Investors are becoming concerned that ESPN's expensive rights contracts with entities including the NFL and NBA are eating into profitability, with net income declining three quarters in a row.

Asked a question he gets a lot these days, Disney CEO Bob Iger dismissed speculation that ESPN will go direct-to-consumer. But he did suggest other Disney brands could receive a la carte SVOD extensions.

"There is definitely an opportunity not just for ESPN but for other Disney brands to ultimately put a product in the marketplace that reach consumers directly," Iger told investors. "We think we have that opportunity with a Disney-branded service. We may have an opportunity to bring out a Marvel-type of product and possibly Star Wars. But we also are mindful of the value of the expanded basic bundle to this company, and we do not believe that there is any reason for us to attempt to take out some of this product, particularly ESPN, quickly or right now. In other words, there's time."

For more:
- read this New York Times story
- read this Deadline Hollywood story
- read this DSL Reports story

Related links:
Report: ESPN will not provide a la carte pro soccer this year
Sizing up pay-TV earnings for the fourth quarter of 2014
What would an unbundled ESPN cost? $30 a month, says Manhattan consulting firm

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