Disney Preparing Cost Cutting Measures
ABC likely to make an announcement in the coming weeks.
By Claire Atkinson -- Broadcasting & Cable, 12/9/2008 9:00:00 AM
Complete Coverage: UBS Global Media and Communications Conference
Walt Disney CFO Thomas Staggs hinted that a big announcement is due from Disney Media Networks and president, Disney-ABC Television Grou, Anne Sweeney. The announcement is expected to address cost cutting measures in order for ABC to maintain its competitiveness in the market. "We are pleased with the extent to which individual business units are taking steps," said Mr. Staggs referring details of cost reductions to Ms. Sweeney.
Addressing an investment crowd on day two of the UBS media summit, Staggs said, "The business we think about most strategically is the network. It is one of the more challenging businesses we have." Speaking in a brief Q& with the press, Mr. Staggs commented on NBC's move to reconsider its programming hours, "I think all the broadcast networks are looking very hard at all the levers they have to pull. Anne Sweeney is doing that."
"We have a predominantly ad supported business. It was a tough fall season across the networks and it's difficult to build momentum coming out of the writers' strike and there was a migration to cable news. It is still incumbent on us to put on the shows that attract the audience so we're hopeful about mid-season. But it is a tough marketplace from an advertising perspective."
He added that individual managers were working to manage costs but when asked about the health of the network segment he responded that poorly rated programming had had a negative impact on ad revenue. In the scatter market, ABC was having difficulty on attracting volume even though pricing was 10% higher than upfront levels.
The company is also preparing for a tough first half. Second quarter pick-ups of ad commitments were "10% below where we expect them to be," he said.
Commenting on the ad enviroment around the broadcast market, Staggs said: "The answer is we're looking at a lot of things and [CEO]Bob Iger has spent a lot of time talking about responses to the environment and you'll see us taking steps over weeks and months. We have management teams that are very experienced and are taking on that challenge. The response at ABC should be tailored to that business and business heads are taking on the challenge."
When asked whether ABC might become a pay-TV channel, Staggs indicated that wasn't on the cards any time soon and that ABC's affiliate relationships had been part of the network's strength over the long haul. "There is real value to our relationship with the affiliates and we want to make the most of that economic model."
"If you look at our business, broadcast TV has secular issues, not least of which is low growth, although folks have talked about ABC becoming a duel revenue business, it remains to be seen how that plays out as we think about how we got to market, providing value to distribution partners is first and foremost on our minds."
Discussing how Disney will weather the downturn, Staggs said the company is focusing on continuing to invest in customer relationship management, technology and global growth.
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Despite the challenging times the networks are facing, giving up on prime time (as NBC is doing at 10pm) and/or considering becoming just another pay TV channel (as ABC is considering) are absolutely the wrong directions. The networks are the only broad-based mass medium out there -- it\'s their killer app. Doing these things actually lessens their value. Maybe it is just too expensive/not profitable enough to run a major network anymore, but I don\'t know how the major nets could possibly succeed as \"the new TNT\".
