May 12, 2016

    Not all is well in the Magic Kingdom

    WALT Disney Company, an investor favourite for consistently beating Wall Street earnings targets, reported a rare miss on Tuesday as advertising and subscriptions declined at sports channel ESPN and theme park revenue came in weaker than expected.

    The home of Mickey Mouse got a boost from animated hit film Zootopia but announced an exit from the console video game business as it dropped the Infinity title it launched less than three years ago.

    Disney and other media companies have been hit by the trend of "cord-cutting" as younger viewers opt for streaming services over cable and satellite TV channels.

    "Cable networks continue to face meaningful headwinds and Disney has yet to really answer how they are going to restore growth," BTIG analyst Richard Greenfield said.

    Revenue in Disney's cable networks business fell 1.86 per cent to US$3.96 billion (S$5.4 billion).

    Ad revenue also dropped, which Disney attributed to a change in timing of college football play-off games.

    Disney took a US$147 million charge for abandoning its Infinity game. The company will focus on licensing its characters for video games rather than publishing its own titles.

    Studio revenue for the quarter increased 22 per cent to US$2.1 billion, powered by the box-office success of Star Wars: The Force Awakens and animated movie Zootopia.

    Revenue in the company's theme park business rose 4.5 per cent to US$3.9 billion.

    Attendance was "weaker than expected, a meaningful surprise for investors", analyst Greenfield said.

    Higher pre-opening expenses for its Shanghai theme park, which opens next month, also dragged down the unit's results, Disney said.