Disney Earnings Jump in Fourth Quarter - Broadcasting & Cable

Disney Earnings Jump in Fourth Quarter

Updated: Big gains in broadcasting and cable
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UPDATED: 7:00 p.m. ET

Walt Disney Co.'s fourth-quarter profits jumped on a strong showing by the company's media networks and parks and resorts.

Fourth-quarter net income rose 30% to $1.1 billion, or 58 cents a share, from $835 million, or 43 cents a share.

Revenues rose 7% to $10.4 billion.

"Fiscal 2011 was a great year financially and strategically, demonstrating the strength of our brands and businesses with record revenue, net income and earnings per share," Disney president and CEO Bob Iger said in a statement. "We are confident the company is well-positioned to deliver long-term value for our shareholders with our focus on quality content, compelling uses of technology and global asset growth."

For 2012, Disney pointed to promising signs at ABC in primetime, an ad market that showed signs of slowing, but where prices remain high, and opportunities to raise affiliate fees in upcoming negotiations with distributors.

Disney also said that the NBA strike would not have a negative impact on ESPN. Instead, most NBA ad dollars are likely to move to other sports properties on the network, including college basketball. And if the lockout continues, any ad revenue lost would be more than  offset by rights fees that wouldn't be paid.

Disney's media networks, including ABC and ESPN, reported a 20% gain in operating income to $1.5 billion. Revenues rose 9% to $4.8 billion.

Cable network operating income rose 18% to $1.3 billion on an 11% increase in revenue to $3.5 billion. The company said its worldwide Disney Channels had better programming sales, higher affiliate revenue due to contractual rate increases in the U.S., and advertising growth internationally. ESPN also showed gains because of higher contractual rates for affiliate fees and a growth in ad revenue that was partly offset by increases in programming, production, labor and marketing costs.

Advertising revenue at ESPN was up 4% during the quarter, but up 7% adjusting for the impact of the Men's World Cup broadcast last years, according to Disney CFO Jay Rasulo, speaking during the company's earning call with analysts.

Broadcasting operating income jumped 37% to $201 billion on a 4% increase in revenue to $1.3 billion. The network had lower programming and production costs and higher advertising revenues. The ad gains came from higher rates, better news ratings and more sports units sold, but were partially offset by lower primetime ratings.

Iger said he saw some "very promising signs" for ABC's primetime. "ABC has two of the top three new dramas" in Disney owned Once Upon a Time and Revenge, he said. The company's Wednesday night block including Modern Family, The Middle and the new series Suburgatory is showing a second consecutive year of double digit growth among 18-49 year olds.

"ABC's new hit dramas coupled with our comedy lineup will form the foundation for a rebuilt and revitalized schedule in the coming months," Iger said.

At the company's TV stations, ad revenues were down 11%, but excluding political advertising and stations recently sold in Flint and Toledo, ad revenue was up in the low single digits.

So far in the first quarter, pricing in the scatter market  has been very strong, up in the mid-20% range above the upfront Iger said. "But it has slowed slightly these last few weeks. That said, the option pickups for January February and March are running slightly above where we thought we would be and when we look at the mix of inventory that we have left including in some very appealing new programs . . . we feel good." he said. "So a little slowing in the last few weeks, up nicely over the upfront this quarter, and we'll wait and see."

ESPN ad sales are pacing up single digits and ABC Family ad sales are pacing up more than 10% Rasulo said.

Given the strength of political spending last year, first quarter TV station ad sales are pacing down, but excluding political, TV station ad sale are pacing up, Rasulo said.

Affiliate income was up 8% in the fourth quarter. Rasulo said that the company will be negotiating new broadcast retransmission and cable carriage agreements with distributors representing 75% of multichannel households by the end of 2014. "The strength of our cable networks and owned TV stations positions us well for a series of upcoming negotiations," he said.

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