Iger: ESPN subscriber losses have 'abated,' but sports costs weigh Disney down

After declining by around 7.2 million subscribers over the last three years, ESPN's audience erosion has abated, at least for now, said Bob Iger, CEO of parent corporation, the Walt Disney Company. 

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"In the last couple of months, we have actually seen an uptick in ESPN subs, which is encouraging," Iger told investors Tuesday during Disney's fourth quarter earnings call, according to a Seeking Alpha transcript.

Disney saw profits soar 32 percent to $2.9 billion, thanks in large part to the worldwide theatrical box-office performance of Star Wars: The Force Awakens. But profits from TV operations slumped 6 percent, which was due in part to ESPN's expensive sports-broadcast rights deals with leagues including the NFL and NBA.

Iger spent much of his presentation assuring investors that the ESPN brand -- and by extension, the pay-TV eco-system -- were solid.

"Last year, 95 percent of Americans with a multi-channel bundle watched sports and 81 percent of those viewers watched ESPN content," Iger said. "Across all platforms, more than 200 million adults engage with ESPN in an average month. In other words, four out of five adults in this country connect with ESPN on some platform every month, usually more than one.

"The vast majority of consumers still see tremendous value in the multi-channel universe and they consistently rank ESPN as the number one or number two most valuable channel within it," Iger added. 

He noted that ESPN's advertising revenue was up 25 percent in the quarter.

"ESPN's ad revenue continues to grow, thanks to its proven ability to reach audiences that advertisers value most," Iger said. "In fact, ESPN's ad sales significantly outpaced the market, growing three times faster than television advertising overall over the last six years. MVPD's just ranked ESPN number one in perceived value for the 16th year in a row, due in part to the fact that ESPN drives more local ad sales and broadband subscriptions than any other service in the market."

Iger also addressed a recent correction made by Nielsen in regard to the number of customers leaving the pay-TV ecosystem. He concluded that any subscriber losses ESPN has experienced recently are due to subscribers taking smaller programming packages, and not necessarily ditching their pay-TV service. 

"It was a timing issue," he said. "At the time that I made the comments last August, we were seeing some sub erosion from both sides, from skinny bundles and from essentially a decrease in the total number of subs. At the time, because of what Nielsen was telling us, we concluded that most of it was coming from simple loss of subs. Once Nielsen corrected those numbers, reducing the loss of subs by some 2 million subscribers -- or 2 million households, I should say -- we concluded that, at that point, our sub loss was largely due to the fact that ESPN was not part of skinny bundles that had launched."

Among those skinny bundles, Iger singled out Dish Network's (NASDAQ: DISH) Sling TV service for its growth potential. 

"The service appears to be growing nicely and is proving very attractive to young consumers in particular, significantly over indexing among millennials and has been quite successful in bringing previous cord cutters back to pay TV, along with new subscribers," Iger said. "Sling TV is clearly additive to the robust MVPD universe and our networks benefit accordingly."

For more:
- read this Seeking Alpha transcript
- read this Associated Press story

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