There have been hints for the last week that Disney’s bet on Star Wars: The Force Awakens would pay off big time when they reported their first quarterly earnings of the year.
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“We don’t know exactly what the drivers are or where the uptick that we’ve seen recently” is, in terms of subscriber growth, Iger said on the company’s February 9 earnings call, adding that the increases did not affect results in the most recent quarter. The Walt Disney Company’s earnings for the first quarter of its fiscal year showed a massive 46% jump in revenue from its movie studio to $2.7 billion, thanks to the success of The Force Awakens. The average 12-month price target for the stock is $9.17, marking a 58% upside from current levels.
“The notion that either the expanded basic bundle is experiencing its demise or that ESPN is cratering in any way from a sub perspective is just ridiculous”, said Mr. Iger. But if consumers could get ESPN without cable, Disney could lose its bargaining leverage in charging cable companies for those exorbitant affiliate fees. Earnings at the ESPN sports network, closely watched by investors, declined and the shares fell.
This decline was due to higher programming costs and fall in subscriber rate at ESPN, which is included in its media networks unit. “The service appears to be growing nicely and is proving very attractive to young consumers in particular”, Iger said, indirectly referencing speculation that young people are less interested in paying for sports content than older generations.
Still, ESPN’s impact at Disney is huge because it leads the cable networks division that accounted for almost half of Disney’s operating income a year ago. Counting one-time items, including $27 million worth of severance and termination costs at ESPN, earnings for the most recent quarter were $1.73 per share. The remarks were part of an effort to counter the arguments that ESPN’s business is in decline, a narrative that has driven the media giant’s stock down 24% since August.
Read the company’s report here.
The blockbuster “Star Wars: The Force Awakens” was largely responsible for Walt Disney Co. Operating income, however, was down 6 percent as ESPN was hurt by a loss of subscribers.
Disney shares fell over 4% in after-hours trading despite rising profits, as the performance of ESPN raised concern about the company’s outlook.
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Disney’s United States theme parks reported higher spending and attendance, boosting operating income for the parks and resorts unit by 22 percent in the quarter to $981 million.
