ESPN helped Disney beat expectations by making up for lost subscribers with higher feesESPN IMAGES
Disney's Q2 earnings and revenue "beat the expectations of analysts," even as its "most profitable segment, media networks" -- which includes ABC and ESPN -- was flat, according to Paul Bond of the HOLLYWOOD REPORTER. ESPN made up for "lost subscribers with higher fees." The media network's $5.53B in revenue included operating income that was down 3% to $2.2B. Disney's better-than-expected results come even as its studio "didn't measure up to what it posted a year earlier." The company was expected to earn $1.58B on revenue of $14.4B in its Q2, but it posted $1.61B -- "excluding certain items -- on revenue" of $14.9B (HOLLYWOODREPORTER.com, 5/8). In L.A., Ryan Faughnder notes losses "more than doubled at Disney’s direct-to-consumer and international business, reflecting the amount of money Disney is spending on new streaming services such as ESPN+ and Disney+." The segment reported a loss of $393M, compared with $188M in the year-ago quarter (L.A. TIMES, 5/9). Reuters Breakingviews Global Editor Rob Cox said, "Two years ago when we talked about Disney, it was all about ESPN crapping out and there were all these concerns about carriage fees. They seem to have a handle on the future on the video streaming business. ... You’ve got ESPN+, Disney+, Hulu. And it may be flat earnings, but to be able to transform the distribution of your business to a streaming era is pretty exciting” (“Closing Bell,” CNBC, 5/8). At presstime, Disney shares were trading at $133.89, down 0.81% from the close of business yesterday.
CHANGING THE NARRATIVE: CNBC’s Bill Griffeth noted Disney is "firing on all cylinders right now," causing people to forget about the previous narrative around ESPN and the "decline of their subscribership." Griffeth: "At least from a PR standpoint, they’ve been masterful in diverting our attention to what is strength for them as opposed to some of their weaknesses.” CNBC’s Dominic Chu: "Whatever the narrative is that they’re spinning, it’s working with investors" ("The Exchange," CNBC, 5/8). CNBC’s Sara Eisen said, "We've been talking about how Disney successfully changed the narrative around the stock, where we used to go straight to ESPN and it was all about the cable. Now we're talking about the parks and ‘Avengers’ and looking ahead to Disney+” ("Closing Bell," CNBC, 5/8). The N.Y. Times' James Stewart said Disney Chair & CEO Bob Iger has “done a brilliant job of changing the whole conversation from this being a legacy media company saddled with potential losses at ESPN to being a high-tech, Netflix kind of company” ("Fast Money," CNBC, 5/8).
EXECUTIVE THOUGHTS: DEADLINE's Dade Hayes noted Iger on yesterday's earnings call asserted a "cautious approach to Hulu -- of which Disney now controls two-thirds" after buying out WarnerMedia’s 10% interest last month. Asked if international expansion or other changes to the loss-making service will be possible so long as Comcast remains a 33% minority partner, Iger "expressed some caution." He said, "Any big decisions that are made in terms of investment or expansion would have to be done with their cooperation. We both probably share a bullish outlook on Hulu, but we can’t do it on our own." One item that "did not come up" during the Q&A period with analysts and Iger was the just-completed sale of the formerly Fox-owned RSNs to Sinclair Broadcast Group. The valuation of the portfolio came to about $14B, a "bit short of the low end of most analysts’ expectations" (DEADLINE.com, 5/8).
