As expected, the success of its blockbuster movie Star Wars: The Force Awakens helped drive record overall results at The Walt Disney Co., but continued weakness at its ESPN unit, driven by subscriber losses and the poor timing of the College Football Playoff games, eroded profits in its television segment.
"Driven by the phenomenal success of Star Wars, we delivered the highest quarterly earnings in the history of our Company, marking our 10th consecutive quarter of double-digit EPS growth,” said Disney chairman and CEO Bob Iger in a statement. “We’re very pleased with our results, which continue to validate our strategic focus and investments in brands and franchises to drive long-term growth across the entire company.
Net income for the quarter was a record $2.9 billion, up 32% from the $2.2 billion generated in the prior year. Earnings per share rose 36% to $1.73 from $1.27 in the prior year. Consolidated revenue increased 14% to $15.2 billion and segment operating income increased 20% to $4.3 billion.
In its media networks division, which includes ESPN and its ABC broadcast network, revenue rose 8% to $6.3 billion but operating income was down 6% to $1.4 billion. Cable network revenue was up 9% to $4.5 billion, while operating income fell 5% due to a decrease at ESPN, which the company said was due to higher programming costs partially offset by an increase in advertising and affiliate revenue.
Disney said results were negatively impacted by the timing of the College Football Playoffs – six more games were aired in fiscal Q1 than were aired in the second fiscal quarter in the prior year. Those additional games helped drive advertising revenue at the cable networks up 12% in the period, but the added costs drove down profits. ESPN weathered some criticism that two national semi-final games were shown on New Year’s Eve (Dec. 31) when most young viewers were not at home watching TV. As a result ratings for the contests were lower than expected, resulting in ESPN having to pay advertisers up to $20 million in make-goods, according to a report in sister publication Broadcasting & Cable.
Affiliate revenue at the cable networks was up 4% in the period, reflecting a 7% increase in contractual rates, partially offset by decreases of 2% due to fewer subscribers and 2% from unfavorable foreign exchange impact.