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The Quarterly Media Scorecard - Broadcasting & Cable

The Quarterly Media Scorecard

Despite challenges, uplifting results on the whole
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Disney Rebound Continues Into Q2

Disney Co. earnings from continuing operations soared 23% in its second quarter, with media networks providing a healthy improvement, though overshadowed by larger gains in movie studio and theme park segments. The improvements, which are robust against a backdrop of a weak economy and exceeded Wall Street forecasts, continue a rebound since Robert Iger was promoted to CEO in late 2005.

Income from continuing operations grew to $1.13 billion for the second quarter ended March 29, or 58 cents a share, compared to earnings of $919 million, or 43 cents a share, a year earlier. Segment operating income rose by 22% to $2.14 billion. That's on revenue of $8.71 billion, up 10%.

On the television end, Disney's growth driver was ESPN, because of contractual rate hikes charged to cable operators and higher advertising rates. All together, the cable division operating income was up 14% to $1.09 billion.

In broadcasting, the operating income was $223 million, up 17%, though revenue was actually down 2% to $1.50 billion. Disney says strong international sales of Grey's Anatomy and Lost helped the division. And while the writers' strike limited scripted programming, which hurt ABC network revenue, the impasse also resulted in lower programming costs.

All together, Disney's media networks revenue rose only 5% to $3.61 billion, but operating income rose 14% to $1.32 billion.

Fox Broadcasting Sparkles

News Corp. reported improved earnings for its third quarter ended March 31, with its TV division that includes Fox Broadcasting posting an impressive 53% spike in consolidated operating income. Its TV, cable network programming, newspaper and information services segments all improved.

In corporate results, News Corp., led by Rupert Murdoch, posted a net income of $2.7 billion, or 91 cents a share, which was inflated by a $1.7 billion tax-free gain sale of its DirecTV stake in a complex stock exchange with Liberty Media. A year ago, News Corp. earned $871 million, or 21 cents a share. Corporate revenue also rose 16% in the third quarter to $8.75 billion, from $7.53 billion.

Regarding the strong TV earnings, News Corp. cited “lower primetime programming costs and advertising strength at the Fox broadcast network, improved results from My NetworkTV and the positive impact of Super Bowl XLII at the television stations.” Lower program costs came from the Hollywood writers' strike, which limited production. The TV segment's consolidated operating income was $419 million, reflecting the 53% rise.

The cable network program segment posted a 17% hike in operating income “despite launch costs for the Fox Business Network and the Big Ten Network,” News said.

Cablevision Holds Basic Subs

Cablevision Systems posted a wider first-quarter loss from derivative contracts, higher capital expenditures and a bigger operating loss at its Madison Square Garden unit, although otherwise operations improved sharply. In particular, its basic-cable-subscriber count held despite intense competition from telephone-company video.

Based in suburban New York, Cablevision is shifting to a growth mode with acquisitions and internal investment after aborting an attempt to take it private in October, as evidenced by its deal last week to buy Sundance Channel for $496 million through its Rainbow Media unit. Also, Cablevision is building a WiFi technology wireless broadband service that covers its cable footprint area, giving its existing subs free wireless service, offered to non-subs for a fee.

Cablevision's net loss widened to $31.6 million, or red ink of 11 cents per share, from a loss of $26.3 million (9 cents). Revenue at the cable-TV media conglomerate rose a healthy 10.1% to $1.72 billion.

For its closely watched cable-subscriber count, Cablevision said its basic head count of 3.125 million subscribers was down 14,000 from March 2007 but up 2,000 from December 2007. Earlier, Time Warner Cable and Comcast reported surprisingly good cable-subscriber results despite Verizon Communications and AT&T rolling out video services.

DirecTV Shows Gains in Q1 earnings

Satellite operator DirecTV posted improved first-quarter results, driven largely by subscriber growth and lower churn despite growing competition from telcos offering new video services.

Overall revenue for DirecTV Group, which runs a direct-to-home satellite service in Latin America in addition to its U.S. operation, increased 17% to $4.59 billion, compared to $3.91 billion last year, while first-quarter net income rose 10% from $336 million to $371 million. Earnings per share increased 19% to $0.32 compared with the same period last year, benefiting from stock buybacks.

DirecTV U.S. had net subscriber additions of 275,000, a 17% jump from last year, due to a 4% increase in gross subscriber additions and a reduction in monthly churn to 1.36%. DirecTV U.S. ended the quarter with 17.04 million subscribers overall.

Sinclair Mulled Going Private

Sinclair Broadcast Group reported broadcast revenue from continuing operations were $160.9 million for the first quarter, up 8.5% versus the first quarter of 2007. Operating income was $46.2 million for the quarter, up 23% over the same quarter last year. Total revenue for the quarter was $186.7 million, up from $164.9 million in the first quarter of 2007.

Sinclair president/CEO David Smith said in a conference call the company had discussed going private because of frustration with its low stock price despite good earnings. But financing such a deal would be difficult with the credit market meltdown, he added.

Ad sales on Sinclair's Fox, CBS and NBC stations were up 15.4%, 24.6% and 8.3% in the quarter, respectively. Stations affiliated with ABC, MyNetworkTV and The CW, meanwhile, were down 3.3%, 0.7% and 1.6%, respectively.

Political, Digital Lift LIN earnings

LIN TV posted improved first-quarter earnings, booking strong political advertising and sharp growth in its digital media, including cable retransmission-consent fees, although the company experienced weaker core advertising.

Its $875,000 in income from continuing operations for the three months ended March 31 compares to a $1.6 million loss in the same quarter a year ago. Revenue at the Providence, R.I.-based group TV broadcaster grew 1% to $93.1 million.

Political advertising—although accounting for just 3% of total company revenue—soared to $3.2 million versus $600,000 and its digital-segment revenues, which included Internet-advertising revenue and retransmission-consent fees, doubled to $4.9 million from $2.5 million.

Young Cuts Push Profits

Young Broadcasting reported a 41% boost in operating income for the first quarter ($1.8 million, up from $1.3 million), compared to the same quarter a year ago. The improvement reflects the company's dramatic cost-reduction measures at its stations.

Despite what Young termed “a challenging advertising environment coupled with a weakening economy,” net revenue for the quarter slipped a modest 1.8%, from $35.6 million a year ago to $35 million for the first quarter of 2008. Political revenue for the quarter totaled $1.8 million.

Reported by Robert Marich, Michael Malone, John Eggerton, Glen Dickson and P.J. Bednarski

E-mail comments to robert.marich@reedbusiness.com

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