Cable, led by ESPN, and broadcast television, led by ABC, helped the Walt Disney Co. (NYSE: DIS) overcome lackluster movie and home entertainment business according to second quarter earnings results.
Disney, overall, saw revenue grow 6 percent to $9.1 billion and net income slip 1 percent to $942 million. Disney's cable networks' revenue grew by 17 percent to $2.8 billion and broadcast television stations revenue climbed 4 percent to $1.5 billion. ESPN and sports continued to drive the cable business, Robert Iger, president-CEO, said during an earnings call, adding that ESPN is in the runnings to cover the Olympics with a package that would be supported by both advertising and "incremental subscription revenue."
"This was ESPN's highest rated Q2 on record with ratings increasing by 10 percent," Iger said. ESPN, he said, is also benefiting from the launch of a real-time viewing app with Time Warner Cable (NYSE: TWC), Bright House and Verizon (NYSE: VZ).
Iger bristled when Deutsche Bank analyst Douglas Mitchelson suggested ESPN has a "ridiculous amount of leverage" with pay TV providers and that the network may have reached the limit of what it can get in subscription fees to support a big-money venture like the Olympics.
The sports network, he said, "certainly intends to take a look at the Olympics seriously" and "it would be wrong to assume that the purchase of the Olympics should be looked at as a possible generator of incremental advertising revenue. It would definitely generate incremental subscription revenue."
ESPN, Iger said, has tried to create "kind of a must-have product for consumers and thus a must-have product for distributors who need to keep their consumers happy and I think they've done a brilliant job of buying sports rights and turning the rights into both profitability and significant brand building."
- see the news release (PDF)
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