Disney’s Q2 media networks income sinks due to ESPN, Freeform struggles

ESPN Los Angeles
ESPN pulled in higher affiliate and advertising revenue but was pulled down by higher programming costs. (ESPN)

The Walt Disney Company reported its fiscal second-quarter results today, marked by lower operating income in its media networks segment due to declines at BAMTech and struggles at ESPN and Freeform.

Revenues for the segment rose 3% to $6.1 billion, and segment operating income decreased 6% to $2.1 billion. Disney’s cable network revenues for the quarter rose 5% to $4.3 billion, and operating income fell 4% to $1.7 billion. The company pinned the declines on BAMTech and the costs incurred from Disney acquiring a controlling interest in the company.

At Freeform, advertising revenue declined due to a decrease in average viewership. ESPN pulled in higher affiliate and advertising revenue but was pulled down by higher programming costs due to the timing of College Football Playoff bowl games and contractual rate increases for college sports and NBA programming. Although affiliate revenue rose for ESPN, the network once again saw subscriber declines.

Disney’s broadcasting revenues and segment operating income stayed flat at $1.9 billion and $343 million, respectively, as rate increases fought off advertising revenue declines and higher network programming and marketing costs.

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Disney’s newly formed segment Consumer Products and Interactive Media saw its revenues increase 2% to $1.1 billion and its segment operating income decrease 4% to $354 million.

The company’s overall results were buoyed by the studio entertainment results marked by revenue rising 21% to $2.5 billion and segment operating income rising 29% to $847 million. The results were driven by the success of “Black Panther” but offset somewhat as “A Wrinkle In Time” didn’t do as well as “Beauty and the Beast” did one year ago.

Overall, Disney’s revenues rose 9% to $14.5 billion during the quarter and segment operating income rose 6% to $4.2 billion.

“Driven by strong results in our parks and resorts and studio businesses, our Q2 performance reflects our continued ability to drive significant shareholder value,” Disney CEO Bob Iger said in a statement. “Our ability to create extraordinary content like 'Black Panther' and 'Avengers: Infinity War' and leverage it across all business units, the unique value proposition we’re creating for consumers with our DTC platforms, and our recent reorganization strengthen our confidence that we are very well positioned for future growth.”