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 Shares of Disney, which have hit record levels as the company
consistently beat forecasts in recent quarters, dropped 2.5 percent
in after-hours trading on Thursday. The stock closed at a record $92
before the earnings were reported.
With the TV landscape rocked by a wave of new online viewing
options, Chief Executive Bob Iger bucked the trend and insisted
Disney would not rush to offer standalone subscriptions to popular
content such as its sports behemoth ESPN outside the traditional
bundle of channels sold by cable and satellite operators.
"We don't feel a compelling need to take a product to market right
now that is a direct challenge to that multichannel bundle," Iger
told analysts during the company's quarterly conference call on
Thursday. He said he expected the current pay TV model "to remain
dominant for some time."
Disney will experiment with online offerings, Iger said, including
ESPN's planned streaming service of some NBA games.
"We think it's actually a smart approach, because we're going to
continue to grow our digital offerings nicely," Iger said. "But we
are also going to work really hard at making sure that that bundle
is viable."
For the quarter that ended in September, net income rose to $1.50
billion, or 86 cents per share, from $1.39 billion, or 77 cents per
share, a year earlier.
On an adjusted basis, the company earned 89 cents per share, in line
with estimates by analysts surveyed by Thomson Reuters I/B/E/S.
"Guardians," another hit from Disney's Marvel studio, and
"Maleficent," starring Angelina Jolie as a black-robed villain,
helped operating income in Disney's movie studio unit more than
double from a year earlier to $254 million. The company also
announced it would release a fourth movie in Pixar's blockbuster
"Toy Story" franchise in June 2017.
Operating income at ESPN declined due to higher contract rates for
high-end National Football League and Major League Baseball games,
which helped drag down the company's cable networks unit by 1
percent to $1.3 billion.
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The drop at cable networks, the company's largest unit, likely drove
Disney shares lower, said Gabelli & Company analyst Brett Harriss,
who rates Disney a "hold."
"Cable networks were a little weak," said Harriss, who added that he
expected ESPN to make up for the programming expenses in future
quarters through higher fees from affiliates.
Operating income at its parks and resorts division rose 20 percent
to $687 million due to increased attendance and higher ticket prices
for theme park admissions.
Revenue rose to $12.39 billion, marginally above the average analyst
estimate of $12.37 billion.
Up to Thursday's close, Disney shares had gained about 20 percent
this year.
(Reporting by Lehar Maan in Bangalore and Lisa Richwine in Los
Angeles; Editing by Saumyadeb Chakrabarty, Ronald Grover, Leslie
Adler and Cynthia Osterman)
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