Disney TV Drives Quarter: ABC Broadcast, Cable Enjoys Ad Uptick

by Wayne Friedman, Feb 5, 2013, 5:40 PM

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Walt Disney's first fiscal quarter got dinged a bit from lower home entertainment and studio results and higher costs at ESPN -- but investors held their ground.

Higher programming fees at ESPN, due to the NFL and college football programming packages, pushed down cable networks' operating income 2% to $952 million. However, cable revenue still rose 7% to $3.5 billion.

The broadcasting side of the business, the ABC network and its stations, did well -- thanks to stronger advertising revenues. Broadcast revenues were up 6% with operating income 16% higher.

The company says: "The increase in network advertising revenues was primarily due to higher advertising rates and higher online advertising, partially offset by lower ratings and fewer units sold... Program sales growth was driven by 'Revenge' and 'Once Upon A Time'." It adds that ABC TV stations benefited greatly from strong political advertising sales.

Overall, for all of Disney's media networks, revenue climbed 7% to $5.1 billion with operating income improving 2% to $1.2 billion for its first fiscal quarter 2013. Company-wide revenues grew 5% to $11.3 billion with net income down 6% to $1.4 billion.

Studio entertainment was a big drag on first quarter numbers -- off 5% in revenue to $1.5 billion and 43% lower in operating income to $234 million. Much of this came from bad comparisons to high revenue-producing numbers from DVDs of "The Lion King" and "Cars 2," which had lower production costs than current releases.

The theatrical business suffered because of high marketing and distribution costs for "Lincoln," in current distribution, and "Monsters, Inc. 3D."

Disney's parks and recreation revenues were 7% higher to $3.4 billion, with operating income up 4% to $577 million. Disney's domestic operations gained from increased guest spending at both Walt Disney World Resort and Disneyland Resort, the Disney Fantasy cruise ship and attendance growth at Disneyland Resort.

The consumer products business was up 7% to $1.0 billion, with operating income up 11% to $346 million. There was a higher mix of revenues from properties that incorporated revenue share, as well as high sales of "Cars" merchandise.

Interactive business was able to reverse some negative trends -- growing revenues 4% to $291 million. The group also had an operating income of $9 million from a $28 million operating loss in the same period a year ago. This was helped by "lower acquisition accounting impacts at our social games business."

Investors were bracing for lower numbers. Disney's stock closed the day up 0.7% to $54.29. After market trading witnessed better gains -- up 2% to $55.33.

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