Disney Profits Impacted by Drop in Ad Sales

BURBANK: The Walt Disney Company posted higher second-quarter earnings, despite feeling an impact from lower ad revenues at ESPN and A&E.

For the quarter ended April 2, profit was up 2 percent to $2.1 billion, with a 4-percent gain in revenue to $12.5 billion.

“We’re very pleased with our overall results in Q2, which marks our 11th consecutive quarter of double-digit growth in adjusted EPS,” said Robert A. Iger, chairman and CEO of The Walt Disney Company. “Our studio’s unprecedented winning streak at the box office underscores the incredible appeal of our branded content, which we continue to leverage across the entire company to drive significant value. Looking forward, we are thrilled with the studio’s slate and tremendously excited about the June 16 grand opening of the spectacular Shanghai Disney Resort.”

Media Networks revenues for the quarter were essentially flat, at $5.8 billion, and segment operating income increased 9 percent to $2.3 billion. Cable networks revenues were down 2 percent and operating income increased 12 percent to $2 billion. ESPN benefited from lower programming costs and higher affiliate revenues, though this was partially offset by lower ad revenues. There was also a decline in subscribers at ESPN. A&E posted lower equity income, with a decrease in revenues, higher programming costs and a negative impact from the conversion of H2 into VICELAND, which is still in a start-up phase. Broadcasting revenues were up 3 percent to $1.8 billion and operating income in the segment was down 8 percent to $278 million, with lower operating income from program sales and higher programming and marketing costs, partially offset by ad and affiliate revenue growth.

Parks and Resorts revenues gained 4 percent to $3.9 billion and segment operating income was up 10 percent to $624 million.

Studio Entertainment revenues grew by 22 percent to $2.1 billion and segment operating income was up 27 percent to $542 million. There was a nice increase in theatrical distribution, thanks to the strong performance of Star Wars: The Force Awakens and Zootopia.

Revenues within the Consumer Products and Interactive Media segment were down 2 percent to $1.2 billion and segment operating income slipped 8 percent to $357 million. The unit did see increased licensing revenues, thanks to Star Wars merchandise.

There was a $147 million charge in the quarter, related to shutting down the Infinity product line. Disney also announced that it is exiting the self-publishing business altogether.