Disney’s media networks operating income during the first quarter was pulled down 12% to $1.2 billion due to sagging performances by Hulu, A+E and the broadcasting segment.
Hulu and A+E, which are reported as equity in the income of investees for Disney, fell to $50 million after posting $119 million in the year-ago quarter. The decrease at Hulu was due to higher programming and labor costs and was somewhat offset by subscription and advertising revenue growth. The decrease at A+E was due to lower advertising revenue, higher marketing costs and increased programming costs, according to a news release (PDF).
Broadcasting revenues fell 3% to $1.8 billion and operating income fell 25% to $285 million due to lower advertising revenue, higher production cost write-downs and a decline in program sales income. Disney was able to stave off the declines somewhat as affiliate revenue grew due to rate increases. Advertising revenues reflected fewer network impressions and lower political advertising at the company’s owned television stations.
While broadcasting and equity investments struggled somewhat, Disney’s cable networks division mostly held steady, with revenue up 1% to $4.5 billion and operating income down 1% to $900 million. Once again, ESPN came under pressure from lower ad revenue due to fewer impressions and lower rates as average viewership declines. The declines in the segment were also due to BAMTech, which posted an operating loss, now be reported as part of the cable segment.
But Disney Channels and Freeform both delivered growth thanks to higher affiliate revenue and lower marketing costs despite declines in subscribers.
“The strategic investments we’ve made have driven meaningful growth over the long term, and we remain confident in our ability to continue to deliver significant shareholder value,” said Disney Chairman and CEO Bob Iger in a statement. “We’re excited about what lies ahead, with a robust film slate, the launch of our ESPN direct-to-consumer business, new investments in our theme parks and our pending acquisition of Twenty-First Century Fox.”
In all, media networks revenue remained flat at around $6.2 billion and operating income fell 12%. Disney’s total revenues rose 4% to $15.3 billion and net income rose 78% to $4.4 billion, thanks largely to growth in Parks and Resorts.