Bob Iger
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Despite record results for most of its units, the blockbuster success of “Star Wars: The Force Awakens” and soaring predictions of future growth from Disney CEO Bob Iger, some analysts and the market continued to be less than bullish about the company because of perceived weakness at ESPN.

Disney shares declined slightly in after-hours trading after the conglomerate announced its first quarter results for fiscal 2016. The fall-off came despite a 10th straight quarter of increased earnings per share (now at $1.73) and new highs in revenues ($15.24 billion) and operating income for Parks and Resorts (up 22% to $981 million), Studio Entertainment (up 86% to more than $1 billion, for the first time) and Consumer Products/Interactive (up 23% to $860 million).

Instead of focusing on those booming results, many questions for Iger during Tuesday’s earnings call centered on continued concerns about the number of television subscribers receiving the sports network ESPN. The Media Networks unit was the one laggard for Disney in the report, with operating income down 6% to slightly above $1.4 billion from the same quarter a year earlier.

The dropoff came despite what Iger said were positive signs of a rebound in subscription rates for the sports network. “In the last couple of months we have actually seen an uptick in ESPN subs, which is encouraging,” Iger said. He said some of the recent comeback (after the earnings filing) was due to the fact that younger subscribers who might have eschewed the channel could not receive it through “skinny” bundles, like Dish’s Sling TV. He said Sling was “growing nicely and proving attractive to young consumers in particular, significantly over-indexing [among] millennials.”

The focus on the sports network has been particularly acute since August, when Iger’s acknowledgement of “some subscriber losses” led to a selloff not only of Disney shares, but of the stock of other media companies with revenue heavily dependent on traditional cable-TV packages.

After Iger offered his confidence in the strength of ESPN, analysts peppered the Disney chief with several follow-ups about what made him so confident. Iger said the company had learned that initial Nielsen estimates of the ESPN decline were inflated and some were tied to smaller cable bundles that the sports network was not part of. He said the company is pursuing new platforms on which to distribute ESPN, which could help offset those deficits, though he did not offer specifics.

Iger offered a spirited defense of both ESPN and the traditional cable bundle.

“The notion that either the expanded basic bundle is experiencing its demise or that ESPN is cratering in any way from a sub perspective is just ridiculous,” the Disney CEO said. “Sports is too popular. And it’s not just at ESPN; look how the Super Bowl did, as a for instance. I realize it’s an ultimate event.

“But day after day, week after week, month after month, year after year, live sports ends up being among the highest-rated programs across television,” Iger continued. “And ESPN has this . . . incredible set of license agreements with all the major sports … the best menu of live sports that is out there. So we actually feel good about it.”

Facing yet another question about the ESPN subscriber situation, Iger said that predictions about declining subscriptions had “abated,” adding: “We believe the predictions many have made are more dire than they should be.”

Disney shares dropped a little more than 3%, to $89.38 in after-hours trading.

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