Disney today announced fiscal first-quarter results showing $15.3 billion in consolidated revenue, which stayed mostly flat year over year despite growth in media networks.
Diluted earnings per share for the quarter decreased 36% to $1.86 from $2.91, and net income decreased 37% to about $2.8 billion. That decrease was largely due to a steep 63% drop-off in operating income at Disney’s studio entertainment division and a widening operating loss for the company’s direct-to-consumer business segment.
Quarterly revenue for Disney’s media networks grew by 7% thanks to increases in both cable networks and broadcasting. Cable networks revenues rose 4% to $4 billion, but operating income decreased 6% to $743 million due largely to ESPN and Freeform. ESPN’s decrease was due to higher programming costs, and Freeform’s decrease was due to lower advertising revenues.
Broadcasting revenues rose 12% to $1.9 billion, while operating income increased 40% to $408 million. Disney attributed the income increase to affiliate revenue growth, increased advertising revenue and higher program sales, partially offset by higher programming costs.
Disney’s direct-to-consumer and international revenues for the quarter decreased 1% to $918 million, and segment operating loss increased from $42 million to $136 million. The widening operating loss was due to increased investment in ESPN+ (which Disney said now has more than 2 million subscribers), a loss from streaming technology services and costs associated with the upcoming launch of Disney+. The company said the decrease was partially offset by an increase at international channels and a lower equity loss on Hulu.
International channels benefited from lower costs, affiliate revenue growth and higher program sales, while Hulu was helped by increases in subscription and advertising revenue, partially offset by higher programming costs.
“After a solid first quarter, with diluted EPS of $1.86, we look forward to the transformative year ahead, including the successful completion of our 21st Century Fox acquisition and the launch of our Disney+ streaming service,” said Bob Iger, chairman and CEO at Disney, in a statement. “Building a robust direct-to-consumer business is our top priority, and we continue to invest in exceptional content and innovative technology to drive our success in this space.”
Disney’s earnings release today comes shortly after the company submitted an 8K filing with the SEC to provide financial information regarding its recently formed Direct-to-Consumer and International business segment. For the fiscal year ending on Sept. 30, 2018, both Hulu and BAMTech helped contribute to losses totaling more than $1 billion.