Disney Q4 Earnings Rise 8% to Cap Record Year - Broadcasting & Cable

Disney Q4 Earnings Rise 8% to Cap Record Year

Updated: Higher costs hurt income at ESPN
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The Walt Disney Co. said fourth quarter earnings rose and the company finished the year with record earnings of $7.5 billion.

The company’s cable networks helped boost earnings, which were turbocharged by revenue generated by the hit film Frozen.

Net income in the quarter was $1.5 billion, or 89 cents a share, up 8% from $1.39 billion, or 77 cents a share a year ago.

Revenues for the quarter rose 7% to $12.3 billion.

The earnings managed to slightly exceed Wall Street forecasts.

“Our results for fiscal 2014 were the highest in the company’s history, marking our fourth consecutive year of record performance,” CEO Bob Iger said in a statement. “We’re obviously very pleased with this achievement and believe it reflects the extraordinary quality of our content and our unique ability to leverage success across the company to create significant value, as well as our focus on embracing and adapting to emerging consumer trends and technology.”

Disney’s media networks group had flat earnings at $1.4 billion. Revenue increased 5% to $5.2 billion but costs for programming and production at ESPN and ABC were higher.

Cable network operating income was down 1% to $1.3 billion despite a 6% rise in revenues to $3.8 billion. ESPN had higher costs for its Major League Baseball, NFL and college football rights. Affiliate revenue was higher and advertising revenue rose 5% despite lower ratings.

The domestic Disney Channels had higher operating income because of higher affiliate revenue and lower marketing costs.

Disney’s broadcast operations had operating income of $163 billion, up 3% from a year ago. Broadcast revenue rose 5%. Ad revenue was down by low-single digits because ABC sold fewer units.

On Disney’s conference call with analysts CFO Jay Rasulo said that so far this quarter, fourth quarterscatter prices were 12% above upfront levels .

At ESPN, NBA sales were up 21% year over year and there was excitement in the market over the college football playoffs, but Rasulo said overall there was a little bit of softness at ESPN, with ad sales packing down low single digits. But he added that it was a very late moving market. “We’re optimistic that we may feel better at the end of the quarter,” he said.

During the call, Iger said that while Disney has often been aggressive in distributing its content digitally, he saw no need to introduce an over-the-top product now.

Iger defended the value of the current cable bundle, noting that in an a la carte world, many smaller networks would disappear and consumers would have less choice.

“We’re don’t feel a compelling need to take [an OTT] package to market,” Iger said. “We’re ready to do it if we have to ... there’s no need to do it now in a way that precipitates the downfall of the bundle.”

Iger said that some might call the approach conservative, but he preferred to think of it as smart.

In ESPN’s new deal with the NBA, ESPN has the rights to create a mobile OTT product. But iger said the NBA package would be an add on for NBA fans, enhancing their enjoyment of the sport, but not replacing the games on that air on ABC and ESPN. “The game of ESPN will be stronger than what we’ll ever offer in an over the top package,” Iger said.

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