Blockbusters boost Disney profits but cable revenues fall

NEW YORK - Strong ticket sales from the latest "Star Wars" film and "Zootopia" helped modestly lift Disney's second-quarter profit, according to results released Tuesday.

But revenues from Walt Disney Co.'s closely watched cable television division fell, perturbing investors who have been worried about the prospects for its ESPN network as the traditional cable television model comes under assault.

Earnings for the quarter ending April 2 were $2.1 billion (S$2.9 billion), up about 1.7 per cent from the year-ago period.

Revenues were $13.0 billion, up 4.0 per cent from the year-ago period.

Strong movie ticket sales boosted operating earnings in the studio entertainment business to $542 million, up 27 per cent. The gain was in part due to lingering box-office sales from "Star Wars: The Force Awakens," as well as the animated "Zootopia," which chronicles the efforts of a rookie bunny cop to uncover a conspiracy.

But revenues in Disney's biggest business, media networks, were flat, with cable television revenues down two per cent at $4.0 billion.

Operating income in media networks rose nine per cent to $2.3 billion. ESPN earnings rose in the quarter because of lower costs compared with the year-ago period, which included more costs associated with several college football games due to scheduling.

Analysts fear the erosion of the conventional cable business due to the rise of mobile media and video streaming could harm ESPN, the sports channels that have long been essential to cable television viewer packages and so strong earners.

Chief executive Bob Iger said interest remains high in ESPN among a "number of new entrants" in the streaming video business.

There are "very encouraging signs," Iger said of the negotiations, adding that it was too soon to announce anything.

Operating income in parks and recreation was higher, with US results offsetting the hit from higher costs in international parks due to spending associated with the upcoming launch of Shanghai Disney in June.

Earnings were also marred by a $147 million one-time charge in connection with shutting down Disney's self-published Infinity console games business.

Disney surprised markets in early April when it announced that chief operating officer Thomas Staggs was stepping down. Staggs had been viewed as a successor to Iger, whose contract ends in June 2018.

"Obviously, Tom was a valued colleague," Iger told analysts on a conference call. "We're sorry what came to pass, but we don't really have much else to say." Iger said he has no plans to extend his contract beyond June 2018 and that the board feels it has "ample time" to identify a successor.

Disney's earnings translated into $1.30 per share, or $1.36, excluding some one-time items, below the $1.40 expected by Wall Street.

Shares of Disney fell 5.4 per cent to $100.88 in after-hours trade.