Cable Nets Push Disney Earnings Gain
Media-networks segment -- where ESPN profit soared -- posts strong Q3 results.
By Robert Marich -- Broadcasting & Cable, 7/30/2008 2:43:00 PM
Disney’s basic-cable networks powered modestly improved earnings reported Wednesday for its third fiscal quarter for the three months ended June 28.
ESPN carriage fees and ad gains were the company’s single largest profit driver, but they were accompanied by higher ESPN program and overhead costs. “ESPN led the way, once again,” Disney chief financial officer Tom Staggs told an investors' telephone conference.
Diluted earnings per share from continuing operations climbed 16% to $0.66 from $0.58. Income from continuing operations advanced 7% to $1.28 billion. The “continuing operations” presentation excluded nonrecurring items such as a gain on the sale of its stake in Movies.com and an accounting gain related to its troubled retail stores.
Those per-share earnings were about $0.05 higher than stock analysts' forecasts. But reported free cash flow contracted 15% to $583 million in the quarter at Disney, which is one of 30 stocks used in the closely watched Dow Jones Industrial Average.
Revenue advanced 2% to $9.24 billion.
“We’ve had another solid quarter at The Walt Disney Co., further illustrating our creative momentum, the competitive strength of our brands and our ability to cohesively manage a great collection of assets,” president and CEO Bob Iger said in the earnings release.
In its media-networks segment -- which includes ABC and its basic-cable networks -- operating profit rose 9% to $1.47 billion, while revenue advanced 8% to $4.12 billion. The operating-profit improvement surpassed a 3% hike in parks/resorts and declines in the company’s two remaining segments -- film studio and consumer products.
Media networks also includes ABC, where operating income fell 11% to $260 million due to higher program costs and soft local ad sales at owned broadcast-TV stations. “Revenue at ABC Television Network was comparable to the prior year as the impact of lower ratings was offset by higher advertising rates and digital media revenues,” Disney’s earnings release said.
Besides ESPN, the media-networks segment also got a lift from other Disney cable networks, including its stake in Lifetime Television and international channels.
In the recently concluded upfront-ad-sales market, ABC achieved CPM (cost per thousand homes) gains in the mid- to high-single-digits, which Disney brass felt was healthy. They also said there was no indication so far that advertisers will cancel these long-lead orders due to recession jitters, as some analysts fret. Disney cable networks made similar upfront market percentage gains and sold more volume.
The writers' strike earlier this year hurt ABC network ratings and disrupted timing of investment in TV programming. Iger said Disney is producing programs as it normally does despite the expiration of Hollywood’s Screen Actors Guild contract and talks deadlocked. “I don’t think there is any work stoppage imminent, by the way,” he added.
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