Disney: ABC, ESPN Endure Ad Losses, But Positions Solid

Disney CEO Bob Iger, perhaps the least bullish top media executive on the fate of broadcast networks, said Thursday that ad sales at ABC are losing some steam. The network has recently experienced a "slowing of the pace of national advertising," he said.

Scatter pricing remains above the upfront -- by low double-digit percentages -- but far fewer advertisers are making deals, CFO Tom Staggs added. The robustness of the market in the recently completed third quarter was "down appreciably," he said. But for the most part, advertisers are not exercising options to break commitments for early next year.

The executives also said ESPN saw some softness in ad sales, although that may have been due to dollars flowing to the Olympics, while ABC Family posted a solid performance. Not surprisingly, the executives, who spoke on a conference call to discuss results for the July-September quarter, said that the local station business is struggling. Revenues in the quarter at the 10 owned-and-operated ABC stations were down 12%.

Disney is not alone with troubles at its O&Os. But it looks to be the only company that has hinted at a slowdown in the market for national broadcast.

In the July-September quarter, the broadcasting business, which includes ABC and the O&Os, experienced an operating loss of $150 million on revenues of $1.3 billion. It lost $33 million a year ago when the climate was healthier.

But the company reported a 4% growth overall for its media networks segment--which adds in ESPN and its high affiliate fees--to $4.2 billion. Overall, Disney saw revenues up 6% to $9.4 billion. Advertising accounts for only 20% of company revenues.

Iger said the company is content with ABC's on-air performance -- it's No. 1 in the C3 ratings in the key 18-to-49 demo this season -- although it is seeking improvement going into the new year. "We like our overall position in the marketplace, given our attractive demographics--but our goal is to strengthen our schedule with the addition of numerous mid-season programs" he said.

ABC will offer the new animated show "The Goode Family" and former NBC comedy "Scrubs" early next year, while "Lost" and "The Bachelor" return. Also coming is "True Beauty," an eight-episode reality competition program executive produced by Tyra Banks and Ashton Kutcher, who have both been behind breakout reality series before.

Back in May, Iger expressed some uncertainty about the future of broadcast TV, both on the network and station level. Referring to ABC's prospects, he said: "It's a tough model--it's really tough ... it's a challenged business."

But Iger indicated Thursday that Disney had no intention of selling any of its O&Os, as both NBC and Fox have moved to do.

"These are businesses for us that deliver high capital returns, and while they have been a low-growth." he said. "I guess in the past year because of the fall-off in advertising, no growth, we still believe in them because of the way that we run them, and the free cash flow that they throw off for this company."

Addressing ESPN, Iger suggested that it may be able to increase its competitive position in the turbulent environment. The reason: it might be able to acquire rights to coveted programming as other networks can't come up with the resources.

"I think it's possible that the competition for programming that ESPN has faced could decrease somewhat in this tougher environment," he said.

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