The latest earnings report for The Walt Disney Co. contains some good news along with some bad news, with record profits for the quarter along with a warning about trouble looming for the company’s TV holdings.
“The Burbank company reported net income of $2.48 billion in the third quarter that ended June 27, up 11% from a year earlier. Revenue rose 5% to $13.1 billion,” the Los Angeles Times reports. “But the world’s largest entertainment firm telegraphed to Wall Street on Tuesday that an increasingly fragmented television business could be a drag on cable TV profits, which for years have been a major driver for Disney’s financial performance.”
At the center of Disney’s TV business is ESPN, which brings in top rates from pay-TV distributors. But as consumers increasingly move away from pricey cable bundles toward scaled-down packages and streaming services, the ESPN model may be among the first to feel the pinch.
In a conference call with analysts, Disney Chairman and CEO Robert Iger said: “We’re realists about the business and about the impact technology has had on how product is distributed, marketed and consumed. We’re also quite mindful of potential trends among younger audiences in particular, many of whom consume television in very different ways than the generations before them.”
At this point the company is anticipating only modest erosion, the report notes.
“Last year, Disney forecast that its cable business’ operating income would grow by ‘high single digits’ on a compounded annual basis from 2013 to 2016,” the Times notes. “Now, Iger said, it is expected to grow in the ‘mid single digits’ range, in part because of ‘slightly less subscribers,’ including some at ESPN.”