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Disney’s Earnings Pop As ESPN Subscribers Drop

ESPN 3-D Television Launch Event For 2010 FIFA World CupESPN 3-D Television Launch Event For 2010 FIFA World Cup
One of several studios on the Bristol, Conn. ESPN campus Bloomberg via Getty Images

Walt Disney reported better-than-expected quarterly profit and revenue on Tuesday, fueled by a near 40% jump in revenue at its studio unit.

The Numbers: Net income attributable to the company rose to $2.6 billion, or $1.59 per share, in the third quarter ended July 2, from $2.48 billion, or $1.45 per share, a year earlier. Excluding items, the company earned $1.62 per share. Analysts on average had expected a profit of $1.61 per share and revenue of $14.15 billion.

Revenue rose to $14.28 billion from $13.10 billion.

Disney‘s shares were down marginally at $96 in extended trading on Tuesday.

Revenue in Disney‘s cable networks business rose 1.4% to $4.20 billion in the third quarter ended July 2.

ESPN—the company’s cash cow—grew in the quarter due to affiliate and advertising revenue growth, partially offset by higher programming costs, Disney said.

Disney (DIS) also said ESPN posted a decline in subscribers.

What it Means: Like other media companies, Disney, owner of the ABC network, has been hit by “cord-cutting”—the switch to streaming services from cable and satellite TV.

In the same period a year earlier, Chief Executive Bob Iger warned that ESPN was weighed down by “modest” declines in subscribers, as they moved to cheaper digital platforms.

Studio entertainment revenue increased 39.6% to $2.85 billion, helped by a brace of successful Disney movies such as “The Jungle Book” and Marvel’s “Captain America: Civil War” and Pixar’s “Finding Dory.”

Revenue at its theme park and resorts business was up 6 percent to $4.38 billion.

What You May Have Missed: Disney also said it was acquiring a 33% stake in BAMTech, a video-streaming company formed by Major League Baseball (MLB), for $1 billion. The company has the option to acquire a majority ownership in the coming years.