ESPN Continues to Plague Disney as Revenue Misses

Fortune Brainstorm TECH 2016
Fortune Brainstorm TECH 2016 MONDAY JULY 11TH, 2016: ASPEN, CO 7:05 PM KEYNOTE CONVERSATION Robert Iger, Chairman and CEO, The Walt Disney Co. Interviewer: Michal Lev-Ram, Senior Writer and Co-chair, MPW Next Gen and Brainstorm TECH, Fortune PHOTOGRAPH BY STUART ISETT/Fortune Brainstorm TECH
Photograph by Stuart Isett — Fortune Brainstorm TECH

Walt Disney reported lower-than-expected quarterly revenue, hit by lower advertising sales and subscriber losses at ESPN as well as an extra week last year.

Disney, whose shares were down 2.8% in after-hours trading, said the decrease at ESPN also reflected higher programming and production costs.

Revenue in Disney’s cable networks business, which includes the company’s cash cow ESPN and the youth-focused Disney Channel, fell 6.8% to $3.96 billion. Analysts were expecting $4.13 billion, according to FactSet StreetAccount.

Nielsen data estimated that ESPN lost 621,000 subscribers in November—a figure Disney has hotly contested.

Disney (DIS) and other media companies are facing challenges from “cord cutters” who are dropping TV subscriptions for cheaper and more convenient online services.

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To fight back, Disney said in August it would launch an ESPN subscription streaming service by the end of 2016. The service won’t include content that appears on ESPN’s TV networks.

The future of ESPN has been in focus since August 2015 when Disney Chief Executive Bob Iger acknowledged “modest” subscriber losses at the sports network.

Disney’s movie business generated revenue of $1.81 billion in the quarter, up 1.57%, missing the average FactSet estimate of $1.84 billion.

The company’s major release in the period, Pete’s Dragon, has grossed about $141 million worldwide so far, according to tracking firm Box Office Mojo.

Revenue in Disney’s theme parks, resorts and cruise line business rose 0.6% to $4.39 billion. The company opened its Shanghai theme park in June.

Net income attributable to the company, which also owns the ABC TV network, rose to $1.77 billion, or $1.10 per share, in the fiscal fourth quarter ended Oct. 1 from $1.61 billion, or 95 cents per share, a year earlier.

Excluding items, the company earned $1.10 per share.

Disney’s revenue fell to $13.14 billion from $13.51 billion.

Analysts on average had expected an adjusted profit of $1.16 per share and revenue of $13.52 billion, according to Thomson Reuters.

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