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Disney Reports Weaker Than Expected Revenue as Cable Continues to Weigh

The Walt Disney Company is trading about 1.5% lower in after-hours trading after reporting quarterly profits. Despite impressive profits, investors are selling the stock amidst continued concerns over the future of cable programming, specifically ESPN.

Overall revenues increased by about 3%, led by a 9% increase in the theme parks division and overall operating margins increased by about 100 bps to last year. Those figures, combined with a lower share count from the company’s ongoing share repurchases, meant that earnings per share increased from $1.31 last year to $1.51 this year. That was $.09 per share ahead of analysts expectations.

Investors have placed a spotlight on cable programming assets in recent years as fears increase about the long term effects of cable cutting by consumers due to high prices. ESPN has been among Disney’s most lucrative assets since its 1996 purchase of Capital Cities / ABC. Higher programming costs in the quarter dented ESPN’s profitability as it has to compete with other networks looking to feature sports programming. In particular, ESPN had to fork over significantly more money for its NBA contract and the College Football Playoff. Disney recently purchased a part of MLB’s streaming assets in an effort to “go over the top” or prepare to offer content directly to subscribers rather than through cable networks.

The film division posted results that were essentially flat to the prior year, mostly a result of multiple film timings netting each other. The division is preparing for another blockbuster success at the end of the year when it releases the next film in the Star Wars saga.

 

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