Massive ESPN Subscriber Losses Continue to Drag Disney Profits Down

ESPN is still dragging down the profits of owner Disney Co as fourth quarter fiscal reports come in. It is a pattern that has repeated itself all year.

The latest financial report notes that Disney had an “unexpected” drop in profits and also confirms that ESPN is still losing subscribers by the millions, Reuters reported.

After the fourth quarter report was revealed, Reuters noted that Disney profits were down once again, “dragged down by a poor performance at its cable business, including a drop in subscribers at ESPN:”

Revenue from Disney’s cable business, which includes ESPN and Disney Channel, fell marginally to $3.95 billion in the fourth quarter, while analysts on average were expecting a rise to $4.06 billion, according to Thomson Reuters I/B/E/S.

ESPN, Disney’s cash-cow, has been trying to combat subscriber declines by joining smaller bundles of cable channels and developing a streaming service it will sell directly to consumers.

“Disney’s total revenue fell to $12.78 billion in the quarter ended Sept. 30 from $13.14 billion a year earlier,” Reuters added.

Yet, despite the millstone of ESPN around the company’s neck, Disney CEO Bob Iger put a sunny face on the financials insisting that things are looking up.

In a recent company investor call, Iger claimed that he was “heartened” by the fact that ESPN’s subscriber losses weren’t quite as bad as they were in the previous quarter.

Iger also said he was impressed by the new advertising scheme, especially for sports products.

“We’re pleased with trends we’re seeing on the OTT side where we’re seeing a nice pickup in subs,” the Disney CEO said. “They obviously believe that the sports fan is potentially a primary customer of new OTT services.”

The company is set to invest heavily in direct-to-customer sales as opposed to cable bundling with a new product line to be launched in spring of next year.

“Our goal here is to be a viable player in the direct-to-consumer space, space that we know is very valuable to be in,” Iger said. “We believe creating a direct-to-consumer relationship is vital to the future of our media businesses and it’s our highest priority this year.”

Finally, Iger touted the “significant” increase in “out of home,” or device streaming, viewing recent reports have shown.

“We feel good about what we’re seeing. While there’s obviously a lot of attention paid to ESPN and the loss of subs and all that, we’ve always been bullish on ESPN. …We like where ESPN is these days. …We think the trends we’re seeing are giving us reason to feel good about the business,” he concluded.

Follow Warner Todd Huston on Twitter @warnerthuston.