Disney Blames College Football Playoffs, NBA Games For ESPN Profit Slump

Walt Disney DIS just reported its second quarter fiscal 2018 earnings, and the massive media conglomerate is garnering plenty of attention today because of it. Of course, the media and entertainment behemoth has its hands in a lot of things, but perhaps the most intriguing part of today's report is the new data from its Media Networks division.

Disney's Media Networks, which includes all-day sports programming channel ESPN, has been the focus of investors over the past few years due to increased competition from Netflix, Inc. NFLX, Hulu, and Amazon.com, Inc AMZN's Prime Video.

ESPN and Disney's other channels are inherently linked to cable subscriptions, meaning that the "cord-cutting" phenomenon has cut into the company's revenues.

In the first quarter of 2018, Disney's Media Networks division brought in $6.24 billion, which was basically flat year over year. The company has faced several recent quarters where total revenue from the segment actually dipped from the prior-year period.

According to today's just-released report, Disney saw Media Networks revenue of $6.14 billion in the second quarter of fiscal 2018. This topped our consensus estimate of $6.12 billion and marked year-over-year growth of 3%.

Cable Networks revenue increased 5% to reach $4.3 billion in the quarter, with segment operating income declining 4% to touch $1.7 billion. Disney said that lower operating income was primarily due to a loss at BAMTech and decreases at Freeform and ESPN.

The company specifically mentioned that higher programming costs at ESPN were partially offset by affiliate revenue growth and higher advertising growth.

"The programming cost increase was due to a shift in timing of College Football Playoff bowl games and contractual rate increases for college sports and NBA programming," Disney explained. "The current quarter included two semi-final bowl games and one host bowl game, whereas the prior-year quarter included three host bowl games. Semi-final games generally have a higher cost than host games."

Meanwhile, Disney notched Broadcasting revenue of $1.9 billion and operating income of $343 million. These results were essentially flat from the prior-year period.

Overall, the media giant reported adjusted earnings of $1.84 per share, beating the Zacks Consensus Estimate of $1.68 per share. Disney also saw revenue figures of $14.55 billion, beating our consensus estimate of $14.23 billion.

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