Disney Beats Expectations, Iger Bullish On ESPN

Walt Disney Co. turned in a mixed report Tuesday, beating analysts' expectations on earnings but missing them on revenue for the third quarter.

According to The Orlando Sentinel, the company reported profit of $2.5 billion, compared with $2.2 billion the previous year, for the quarter that ended June 27.

Bob Iger

Earnings per share were $1.45, up from $1.28 last year. Revenue was $13.1 billion, up from $12.5 billion the previous year.

Analysts had expected $1.42 per share and $13.22 billion in revenue.

"We're very pleased with our performance," Chief Executive Officer Bob Iger told analysts Tuesday. He described them as "strong results across the board."

The stock was down 6 percent in after-market trading. Analysts described that as an overreaction to Disney's warnings that cable operating income would be lower than they originally expected.

• CEO Bob Iger took a large chunk of time at the beginning of the Walt Disney earnings call to vigorously defend ESPN -- a nod to recent rampant discussion about the sports empire's fortunes in the new multichannel environment.
• "We're realists about the business and about the impact technology has had," Iger said. "We're also quite mindful about trends in younger audiences in particular."
• "ESPN has experienced some modest sub losses -- though those are less than reported by a prominent research firm," Iger said. "And the vast majority of them, 80%, are due to decreases in multi-channel households ... only a small percentage due to skinny bundles." Nielsen has said that ESPN has lost 3.2M subscribers in just over a year.
• In the company's fiscal Q3 results, it noted that operating results at ESPN were driven by affiliate revenue growth even as ad revenue declined. Subscriber numbers were goosed by the August 2014 launch of the SEC Network. Lower ad revenues "reflected lower ratings and rates."
• Last week Iger suggested that ESPN could go direct to consumers (over-the-top) eventually, but today talked up the standard program bundle and said unbundling is still "a positive trend for us ... ESPN is a must-have brand," not only No. 1 in sports media but the leader in live programming. "Ninety-six percent of all sports programming is watched live," he said, particularly valuable in today's ad marketplace.