Disney Profit Rises With Gains At Cable Networks

(Reuters) -- Walt Disney Co reported higher quarterly profit that beat Wall Street forecasts as cable networks including ESPN brought in higher advertising revenue and collected more fees from pay TV distributors.

Disney shares were roughly unchanged in after-hours trading. In August, the stock plummeted when the company acknowledged a decline in subscribers at ESPN, elevating fears across the pay television business about a shift to online video services.

For July through September, Disney's net income rose to $1.61 billion, or 95 cents per share, from $1.50 billion, or 86 cents per share, a year earlier. Excluding items, the company earned $1.20 per share, beating analysts' expectations of $1.14, according to Thomson Reuters I/B/E/S.

Revenue came in slightly below analysts' estimates. The company also said it lost subscribers at certain cable networks while it gained customers from the SEC Network it launched last year.

Bob Iger

Overall, the media networks unit that includes ESPN, the Disney Channels and ABC recorded a 27 percent increase in operating income to $1.8 billion.

Disney Chief Executive Officer Bob Iger said the company was sticking with the forecast it gave in August when the company lowered its cable profit guidance after saying ESPN had experienced "modest" subscriber losses.

On Thursday, Iger said he remained "bullish" about ESPN and "there was no reason to panic" about his earlier comments acknowledging changes in TV viewing habits.

"We like the environment because we think long-term it gives us more opportunities," Iger said.

The threat of "cord-cutting," or dropping of pay TV service, remains a key concern for investors. On Wednesday, media stocks dropped when Time Warner Inc said it needed to take new steps to adapt to the television shakeup.

CLSA analyst Vasily Karasyov said Disney's latest results for ESPN "should be comforting" to shareholders.

The company's total revenue rose 9.1 percent to $13.51 billion, but missed the average analyst estimate of about $13.57 billion.

(Reporting by Lisa Richwine in Los Angeles and Devika Krishna Kumar in Bengaluru; Editing by Kirti Pandey, Lisa Shumaker and Bernard Orr)

Takeaways from analysts conference call:

• While CEO Bob Iger used the beginning of last quarter's earnings call to talk about ESPN subscriber losses -- talk blamed for driving media stocks down overall this summer -- the Q4 call started out all Star Wars. 
• The company's pleased with ticket-sales excitement and looking ahead to videogames like Star Wars: Battlefront and a cavalcade of associated merchandise.
• Disney can't recognize revenue from the already-begun sales of (new) Star Wars consumer products until the movie opens, though execs say they're excited for the eventual inclusion in Q1, and merchandise tied to the previous films is building strength.
• ESPN was downplayed despite questions. There's nothing he'd retract from previous comments, Iger says: "We decided to be candid, I think refreshingly so, regarding sub losses in the last period. We feel there should be no reason to panic over comments like that ... We feel bullish about ESPN and ESPN's business."
• On the ESPN layoffs: "The best interpretation is that you should see it as not connected to anything else."