Walt Disney Co. reported falling sales in the most recent quarter as the company continued to grapple with a decline in cable network subscribers and a weaker year at the box office.
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The media industry has been grappling with a decline in traditional cable subscribers and the rising popularity of on-demand viewing. The shift has turned Disney's TV business, which includes cable and broadcast properties, into more of a burden than a growth driver.
Revenue from the cable networks segment, which houses ESPN, dropped 3% to $5.47 billion; analysts had been expecting slight sales growth. Operating income slid 12%, contracting for the fifth time in the last six quarters.
Shares fell 3% to $99.62 in after-hours trading, erasing the 1.48% gain logged during the day Thursday.
ESPN has struggled with declining viewership more than other networks, as it also contends with high costs for sports broadcasting rights.
Disney has outlined plans to sell its sports and entertainment programming directly to consumers, sidestepping traditional cable providers and streaming services such as Netflix Inc. For Disney, streaming services would provide a new source of revenue and help it reduce reliance on licensing fees from third-party distributors.
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The company has already bet billions of dollars on this pivot. Earlier this year, Disney purchased a majority stake in BamTech for $2.58 billion to bolster its streaming initiatives. Disney has also held talks with 21st Century Fox to acquire its entertainment assets to strengthen its content library against rivals. The talks are no longer active and it isn't clear whether they will resume.
Sales in Disney's film-production and consumer-product businesses also fell in the latest quarter, suffering from comparison with a year-earlier period bolstered by the sale of Star Wars distribution rights and merchandise, and the "Finding Dory" animated film. Production-related operating profit plunged 43% compared with last year.
The company's theme-park segment, where sales grew 6%, was the only business to post a sales increase.
In all, for the fourth quarter the California company reported a profit of $1.75 billion, or $1.13 per share, down from earnings of $1.77 billion, or $1.10 per share a year earlier. On an adjusted basis, earnings fell to $1.07 per share from $1.10.
Revenue dropped 2.8% to $12.78 billion.
Analysts polled by Thomson Reuters had forecast earnings of $1.12 on $13.23 billion in revenue.
Write to Imani Moise at email@example.com
(END) Dow Jones Newswires
November 09, 2017 17:18 ET (22:18 GMT)