Blog Post

What Cord-Cutters? Surging ESPN Drives Disney’s Profitable Q1

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

Driven by record high carriage fees for its ESPN (NYSE: DIS) cable channel, and robust holiday attendance at its theme parks, the Walt Disney Company reported Tuesday a 1 percent gain in first fiscal quarter profits to $10.8 billion and an 11 percent year-to-year increase in income to $2.4 billion. No programming asset in the cable business has proven as resistant to cord-cutting as live sports. And the major cable and satellite carriers have all upped fees they pay to Disney to carry sports’ flagship TV programming brand, ESPN.

For Disney’s fiscal first quarter ended Dec. 31, the company reported that operating income at its cable networks increased by $196 million to $967 million, with ESPN cited for having driven most of that growth and the Disney Channel getting an assist. This growth came, Disney said, despite the fact that ESPN’s advertising revenue was flat.

Speaking to investors Tuesday after Disney released its earnings data, company CEO Bob Iger said he expects Disney’s cable performance to get even better after the company’s recently inked renewal deal with Comcast (NSDQ: CMCSA) kicks in.

Iger also told investors that Disney is looking to establish 28-day delays on releasing rental DVDs to outlets like Netflix (NSDQ: NFLX) and Redbox — a plan similar to the arrangement rivals including Warner Bros. (NYSE: TWX) have in place.

He also said the company is reluctant to join its competitors in launching the consortium-backed digital cloud initiative UltraViolet, remarking, “I’m not sure it has proven to be as robust as we expected, or as consumer friendly as we had hoped.”

With attendance at Disney theme parks and cruise ships also burgeoning during the quarter, the most fiscally diversified company in the media business was able to offset under-performance in such areas as broadcast television, motion picture distribution and interactive gaming.

On the studio entertainment side, Disney’s revenue fell 16 percent to $1.6 billion, with DVD and Blu-ray sales of titles including Cars 2, Pirates of the Caribbean: On Stranger Tides and The Help unable to move the needle.

Broadcast TV revenue slid 22 percent to $226 million, with ABC owned-and-operated TV stations unable to find a replacement that can draw the same ratings and advertising dollars that the departed Oprah Winfrey Show garnered in the period a year prior.

And on the interactive side, revenue slid 20 percent to $279 million, with gains in social gaming offset by declines in Disney’s console business.