Disney Sales Miss Forecasts on Weaker Revenue From TV Channels

(Bloomberg) -- The tough climate for TV networks continued to weigh on Walt Disney Co. last quarter, with sales coming up short because of weaker revenue at channels including ESPN.

Disney warned last year that fiscal 2017 would be difficult, hurt by rising costs to televise National Basketball Association games and fewer films being released by its studio. At the same time, newer online sources of entertainment are threatening the TV industry’s two main sources of revenue: pay-TV subscriber fees and advertising sales.

Fiscal third-quarter sales were little changed at $14.2 billion in the period ended July 1, Burbank, California-based Disney said Tuesday in a statement. That trailed analysts’ estimates of $14.4 billion. Profit fell to $1.58 a share, beating the $1.55 average of analysts’ estimates.

Disney fell 3 percent to $103.85 in extended trading. The stock advanced rose 0.6 percent to $107 at the close in New York.

Disney set off a meltdown in media stocks two years ago when the company acknowledged that ESPN, its most profitable network, was losing business as consumers canceled their cable TV subscriptions. The company has since cut costs, terminating on-air personalities while also looking to stem the viewer losses by extending ESPN into new, lower-cost pay-TV packages. Disney plans to introduce an online-only, subscription version of ESPN this year.

Profits at the company’s cable networks division fell 23 percent to $1.46 billion, due to higher programming costs and lower ad revenue.

With pay-TV struggling, the company has been pouring billions of dollars into its theme park business, in part on the belief Disney vacations can’t easily be made obsolete by new technologies. The company opened the $5.5 billion Shanghai park last year and added an “Avatar” land to one of its parks in Orlando, Florida, in May. More park attractions are coming, including “Star Wars” lands in Florida and California in 2019.

Profit at the theme parks grew 18 percent to $1.17 billion, while revenue increased 12 percent, Disney said.

Profit from consumer products income grew 12 percent to $362 million.

Earnings at the film studio fell 12 percent after “Pirates of the Caribbean: Dead Men Tell No Tales” sank at the box office.  Revenue retreated 16 percent.

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net.

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Rob Golum, Mark Schoifet