How Did Cable Drag Down Disney In Fiscal Q4?


“We’re very pleased with our performance for the year, delivering the highest revenue, net income and earnings per share in Disney’s history,” Bob Iger, Chairman/CEO of The Walt Disney Company, said late Thursday, as Disney released fiscal Q4 numbers that showed a severe weakness in its Cable Networks segment.

Net revenue fell 3%, to $13.14 billion, while net income grew 10%, to $1.77 billion.

Disney’s diluted EPS grew from 95 cents to $1.10 during the quarter, while Free Cash Flow increased 29%, to $2.75 billion.

Segment operating income dipped by 10%, however, to $3.18 billion.

The key culprit? Disney’s Media Networks, which house Disney Channel and ESPN, which is mired in a dispute with Nielsen over a huge dip in its November 2016 Cable Universe Estimates.

With a 360-degree “all-device, anywhere you are” approach to delivery, ESPN was specifically cited as a reason why Media Networks revenue in fiscal Q4 fell 3%, to $5.66 billion, and Media Networks Segment Operating Income dipped 8%, to $1.68 billion.

Cable Networks are the only reason for this drop, as Broadcasting dollars grew 8%, to $1.7 billion, while Cable Networks revenue slid 7%, to $3.96 billion.

Operating income with Disney’s Cable Networks arm decreased 13%, to $1.4 billion, in fiscalQ4 due to decreases at ESPN and the Disney-branded Disney Channel and Disney XD. This was partially offset by an increase at Freeform, formerly ABC Family.

Why the decreases at ESPN?

Lower advertising and affiliate revenue, and higher programming and production costs, were a primary reason.

Why the downturn in ad revenue? “Fewer impressions and lower rates,” along with “lower ratings and fewer units sold.”

A decline in subscribers was partially offset by contractual rate increases.

But, an increase in programming and production costs was driven by costs for Olympics programming internationally, the World Cup of Hockey rights, and higher contractual rates for college sports.