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Walt Disney Co. revenue dropped 3 percent during the fiscal first quarter, a period in which the entertainment giant saw declines in its studio and cable television businesses.
Disney on Tuesday reported earnings of $1.55 per share on revenue of $14.8 billion. While profits dropped by 14 percent during the quarter, the entertainment giant still beat Wall Street’s expected $1.50 per share. Analysts, meanwhile, were expecting revenue of $15 billion.
The company faced an especially tough comparison to the first quarter of 2016 when its business was boosted by the much-anticipated release of Star Wars: The Force Awakens, which made more than $2 billion at the box office.
Disney’s most recent quarterly earnings fell during the December premiere of Rogue One: A Star Wars Story, one of several planned stand-alone movies based on the popular franchise.
The film has made more than $1 billion internationally to date, per Box Office Mojo, but Disney’s studio entertainment division still saw a 7 percent decrease in revenue to $2.5 billion during the quarter, also attributed in part to declines in home entertainment sales. During the company’s earnings call, CEO Bob Iger elaborated, “coming off an historic performance last year … we’re thrilled with the continued success of our studio in the first quarter.”
He also touted the performances of Moana and Doctor Strange and teased excitement over Star Wars: The Last Jedi, which he said he watched one week earlier. But CFO Christine McCarthy issued a warning to investors that the studio’s results could be hurt next quarter since Disney will be releasing only one film, its live-action Beauty and the Beast remake, during the period.
ESPN once again was a driving factor in Disney’s lower results. Media networks revenues, of which ESPN is a large percentage, dropped 2 percent to $6.2 billion.
Disney attributed an 11 percent decline in operating income for its cable networks to a decrease at ESPN, a result of higher programming costs and lower advertising revenue. It also noted that a shift in the timing of the college football playoffs — only three playoff games were played during the quarter compared to six games played during the period in 2016 — hurt the segment’s results.
Much like his comments last quarter, Iger reiterated that ESPN is working to embrace new digital initiatives as a way to “continue to address a dynamic, evolving media environment.” He noted that Disney is distributing ESPN and other channels across new over-the-top live TV platforms such as SlingTV, PlayStation Vue and Hulu’s forthcoming service.
The exec also revealed that a planned ESPN streaming service, created in partnership with BAMTech following Disney’s $1 billion investment in the tech company, likely will launch this year and include a wide array of sports, including baseball.
Revenue in the parks and resorts segment increased 6 percent during the quarter to $4.6 billion, thanks in large part to the opening of Disneyland Shanghai. Iger revealed that the new park has had 7 million visitors and could reach 10 million during its first year. Parks attendance in the U.S. this quarter was impacted unfavorably due to Hurricane Matthew, which was felt especially hard in Florida.
During the call, Iger shared that the new Star Wars Lands at Disneyland and Disney World will open in 2019. Meanwhile, its Avatar-themed land will open in Animal Kingdom on May 27.
Consumer Products and Interactive Media revenue decreased 23 percent to $1.5 billion during the quarter as the company saw a decline in its licensing, games and retail businesses as compared to its Force Awakens-fueled first-quarter 2016 sales.
The earnings come amid renewed speculation about the succession plan for Iger, whose contract expires in June 2018. No heir apparent has manifest since the abrupt departure of COO Tom Staggs last March, and now The Wall Street Journal is reporting that Iger could extend his contract for a third time.
Asked about his succession plan during the call with investors, Iger said, “If it’s in the best interest of the company for me to extend my term, I’m open to that.” But the exec added that he was confident a successor will be chosen “on a timely basis and chosen well.”
Disney shares closed Tuesday down less than 1 percent to $109. Shares were down more than 1 percent during after-hours trading.
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