Disney’s Q3 media networks income falls 12% under sports costs, lower ad revenue

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The company blamed the decline on contractual rate increases for sports programming, lower advertising revenue and higher losses from equity investments in BAMTech and Hulu.

The Walt Disney Company saw the third-quarter operating income for its media networks segment fall 12% to $1.5 billion as multiple factors impacted earnings.

The company blamed the decline on contractual rate increases for sports programming, lower advertising revenue and higher losses from equity investments in BAMTech and Hulu, all offset somewhat by higher affiliate revenue. Overall revenues for the segment decreased 3% to $5.5 billion.

Disney’s cable networks remained largely flat—a relief for the company’s still-struggling ESPN—but the broadcasting segment saw its revenues fall 11% and its operating income fall 15% year over year. A 93% decline in equity also contributed to the decline for the segment.

While cable networks like Freeform struggled, results at ESPN remained flat as higher programming costs and lower advertising revenue were offset by higher affiliate revenue. The decrease in advertising revenue was pinned on lower average viewership and lower units delivered. The affiliate revenue growth came from contractual rate increases, though ESPN continued to lose subscribers.

The broadcast losses were blamed on lower advertising revenue due to lower network impressions, lower political advertising and no Emmy Awards show. Disney also cited a decrease in program sales, which was partially offset by an increase in affiliate revenue.

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“No other entertainment company is better equipped to navigate the ever-evolving media landscape, thanks to our unparalleled collection of brands and franchises and our ability to leverage IP across our entire company,” said Robert Iger, chairman and CEO of The Walt Disney Company, in a statement. “We look forward to launching our first direct-to-consumer streaming service in the new year, and we will continue to invest for the future and take the smart risks required to deliver shareholder value.”

Overall, Disney’s revenues fell 3% to about $12.8 billion during the quarter as losses widened for the company’s studio entertainment segment. The company’s operating income fell 11% to about $2.8 billion as media networks, studio entertainment, and consumer products and interactive media saw slower growth year over year.