The Walt Disney Company’s fourth quarter net revenues declined 3% as the entertainment major’s Media Network segment, which houses ESPN revenue, declined by a whopping 12% when compared to last year.
During the fourth quarter of Fiscal 2017, Disney’s EPS came in at $1.07 against the Street’s expectation of $1.12, while revenues of $12.78 billion were below the expected $13.23 billion.
Disney missed Wall Street analyst forecasts for the quarter at the top line as well as the bottom line as revenue decline was across the board except in the company’s Park and Resorts segment. Disney’s total revenues fell 3% in the quarter to $12.78 billion, while net income declined 1% to $1.75 billion.
ESPN saw programming costs for sports rights rise, while advertising revenue and subscriber base declined. The sports network has been a profit driver for Disney for a long time, but cord cutting, rising sports rights costs and other factors have squeezed the unit and forced it into somewhat of a tailspin. From being available in nearly 100 million U.S. households in 2010, it is now down to 87 million, per data from market research firm Nielsen.
But Disney is dealing with the problem. It’s already slated to stop streaming its content on Netflix from 2019, and will start to offer them through its own streaming service expected to launch that year. Next year, Disney plans to launch a dedicated streaming service for ESPN.
The company also has several projects in the pipeline based on some of its biggest franchises, like Star Wars, High School Musical, Marvel and Monsters Inc. Those will be streamed starting 2019 on Disney’s new streaming service, which is expected to launch sometime during the second half of the year. Pricing is expected to come in “substantially below” that of Netflix, which recently increased its subscription rates in the United States.