Report shows ESPN has future on internet TV
Walt Disney (DIS) reported its fiscal 2Q17 (ended March 31) results on May 9, and the report was a mixed bag of fortunes. For example, the report highlighted the challenge that traditional pay-TV companies like Disney, Time Warner (TWX), and Comcast (CMCSA) continue to face amid the rise of online video services.
The report also seemed to offer some hope that the shift from conventional television to Internet-based video would not eradicate Disney from the media business.
Revenue rises, but still short of expectations
Despite the disruptions coming from online video services, Disney’s overall revenues rose 2.8% annually to $13.3 billion in fiscal 2Q17. But that still came below the $13.5 billion that analysts were expecting. Still, its adjusted EPS (earnings per share) of $1.50 easily topped the consensus estimate of $1.41, suggesting prudent cost administration.
ESPN continues to bleed subscribers
ESPN continues to suffer subscriber defection. On top of that, the latest quarter also saw Disney grapple with higher programming costs in its sports channel, which caused the cable division’s operating profit to decline 3% annually to $1.79 billion in fiscal 2Q17.
Shift to Internet shouldn’t eradicate ESPN
Disney has entered into a number of deals to keep ESPN on top of Internet competitors in response to the current cord-cutting trend. For example, ESPN is now offered on DISH Network’s (DISH) Sling TV and Sony’s (SNE) PlayStation Vue. Disney reported encouraging consumer interest in digital ESPN, as well, implying that the company could transform the disruptive wave of cord-cutting into a growth opportunity.