If you care about money, the economy and corporate America, earnings season matters. USA TODAY'S Matt Krantz breaks it down. USA TODAY
The Walt Disney Co. said Thursday fiscal fourth-quarter net income rose 10% as gains in its movie business and lower income taxes offset falling revenue at its cable networks and consumer product units.
Net income for the quarter was $ 1.8 billion, up from $ 1.6 billion a year ago.
Earnings per share, after adjusting for some items, were $ 1.10, short of the $ 1.16 estimated by analysts polled by S&P Global Market Intelligence.
Revenue fell 3% to $ 13.1 billion.
"Fiscal 2016 was our sixth consecutive year of record results, highlighted by the opening of Shanghai Disney Resort, the phenomenally successful return of Star Wars, and our Studio's record-breaking $ 7.5 billion in total box office,” Disney Chairman and CEO Robert Iger said in a statement.
Revenue pressure at the media networks unit, Disney’s largest unit that operates ESPN, ABC and Disney Channels, continued in the quarter. Its revenue, comprising mostly of advertising sales and content licensing fees by pay-TV companies and other distributors, fell 3% to $ 5.7 billion.
Much of the unit’s troubles was concentrated in the cable networks. ESPN, its largest cable network, continues to suffer from high production costs and falling ratings as more viewers elect to cut their cable subscriptions.
Cable networks’ revenue fell 7% to $ 3.95 billion. Advertising sales and affiliate revenue were lower for ESPN as it paid more to secure the rights to Olympics programming, the World Cup of Hockey and college sports.
ESPN’s ratings have been a worrisome spot for Disney executives for months. And Liberty Media Chairman John Malone told CNBC Thursday that he believes Disney could spin off ESPN. “If I had to guess, what you will see is a split of Disney with ESPN spun off and, probably, ESPN could be owned and protected by a distributor in the U.S.,” Malone said.
In an analyst call, Iger said he remains “bullish” about ESPN despite sluggish ratings. The availability of ESPN in cable companies’ “skinny” packages and ESPN’s own streaming options, particularly on mobile devices, could retain and bring younger viewers back, he said. “I feel really good about (ESPN’s) programming and their continued ability to drive solid advertising,” Iger said. “We have taken a more bullish position on the future of ESPN’s (subscriber) base. The causes of the (subscriber) losses have abated.”
The unit’s broadcasting business, which includes ABC, reported an 8% revenue gain to $ 1.7 billion as pay-TV distributors paid more in affiliate fees.
The studio entertainment unit, which runs its movie studio, saw revenue increase 2% to $ 1.8 billion. It continues to enjoy the financial windfall from the first Star Wars franchise movie it developed after buying the brand in 2012. Star Wars: The Force Awakens, which was released last year and has generated more than $ 2 billion in sales worldwide, is now one of the best-selling movies of all-time. And video-on-demand distribution sales rose primarily due to strong demand for Star Wars titles, the company said.
But Disney also said its movies playing in theaters during the quarter — including Pete's Dragon, Queen of Katwe, Finding Dory and Captain America: Civil War — performed worse than the titles in the year-ago period, when Disney had Inside Out, Ant-Man and Avengers: Age of Ultron.
Revenue for the parks and resorts unit, which runs its Disney theme parks, rose 1% to $ 4.4 billion. Attendance at Disneyland Paris and Hong Kong Disneyland Resort fell. But guest spending at its domestic resorts was higher as ticket prices rose and customers spent more on food and beverage.
Iger said he was encouraged by Shanghai Disney’s performance, saying about half of the attendance at the resort that opened in June now comes from outside of Shanghai. “People are coming and they’re staying longer,” he said.
The consumer products and interactive media unit, which operates video gaming and merchandise businesses, reported a 17% revenue decline to $ 1.3 billion. Disney attributed the fall to the discontinuation of its Infinity video console game business and a sales drop from merchandise based on Frozen, its phenomenal blockbuster that was released in 2013.
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