Update: Higher costs hurt ESPN in Q1, but profits should rise: Disney

ESPN

Walt Disney Co. reported fiscal first-quarter results that surpassed most estimates on Tuesday. However, the results were rather lackluster at the company’s media networks unit, which includes ABC, ESPN and other channels. Operating income at the  unit rose just 2% in the period ended Dec. 29 to $1.21 billion on a 7% increase in revenue.

Earnings at Disney’s cable networks fell 2% on higher programming and production costs at ESPN related to college football, the NFL, and a greater number of NBA games than last year, when there was a lockout.

English: Bob Iger at the World of Color Premie...

During the company’s quarterly conference call with analysts, Chief Financial Officer Jay Rasulo said advertising sales at ESPN are on a pace to be up 7% in the March quarter compared with last year.

This kind of ad strength and higher fees paid by cable and satellite operators should increase ESPN’s profitability over the rest of fiscal 2013, Rasulo said.

CEO Bob Iger commented that ESPN has a number of advantages over the various regional sports networks owned by rivals like Fox and Comcast, setting up an “entirely different value proposition.”

“ESPN’s audience is more than four times the size of the audience of all RSNs put together,” Iger said.

Asked if NFL fans were suffering from a kind of “sports fatigue” that would account for lower ratings on ESPN’s “Monday Night Football” this past season, Iger stayed positive.

“The NFL is unique enough that it stands up to all the competition that’s out there,” he said. “I will say that the ratings can be very matchup-centric. When you have games that aren’t competitive … or aren’t that intriguing going into the game,” ratings can suffer. Iger said although “Monday Night Football’s” early season matchups weren’t as good as the network might have desired, some of the issue is simply the fragmentation of media and entertainment in general. “People just have so many things they can do.”Sporting events are so valuable to media companies because they are among the very few types of programming today’s consumer is willing to watch live. Many shows are watched hours or days after airtime via digital video recorder, a less popular alternative with content makers because it allows viewers to skip past commercials, which are still the most vital part of the television industry’s ecosystem.

— David B. Wilkerson