ESPN Hurts Disney's First Quarter Earnings

Revenue down at media company

The Walt Disney Co. reported lower earnings for the first quarter of its fiscal year, with profits and revenue down at ESPN.

Net income fell 14% to $2.5 billion, or $1.55 a share, compared to $2.88 billion or $1.63 a share.

Revenues were down 3% to $14.78 billion.

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Wall Street had expected net income to be down more but wasn't expecting lower revenues.

Disney said that a year ago, it had a gain of 13 cents a share related to its investment in A+E Networks.

Disney's Media Network group saw operating income fall 4% to $1.36 billion as revenues dropped 2% to $6.23 billion.

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Cable network operating income fell 11% to $864 million with revenue dropping 2% to $2.428 billion.

Disney blamed ESPN for the declines, saying that the sports network had higher programming costs and 7% lower advertising revenue, partially offset by affiliate revenue growth. Some of the ad revenue decline was caused by a shift of three college bowl games out of the first quarter and into the second quarter.

The company said operating income at its other networks were essentially flat.

Broadcast operating income was up 28% to $379 million and revenues were flat. The increase in operating income was due to lower programming write downs and affiliate revenue growth. Advertising revenue was flat as local political advertising offset lower ratings at ABC. So far in the second quarter, ad prices in scatter were tracking at 25% above upfront rates, the cmpany said.

"We're very pleased with our financial performance in the first quarter. Our Parks and Resorts delivered excellent results and, coming off a record year, our studio had three global hits including our first billion-dollar film of fiscal 2017, Rogue One: A Star Wars Story," said CEO Bob Iger. "With our proven strategy and unparalleled collection of brands and franchises, we are extremely confident in our ability to continue to drive significant value over the long term."