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ESPN Powers Disney Earnings

Sports leads 7% boost in cable revenues during third quarter
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Add ABC to the list of broadcasters that have been nailing down their share of retransmission consent dollars, as Walt Disney Co. CEO Bob Iger on Tuesday told investors the network is on pace to take in between $400-$500 million per year in affiliate deals by fiscal year 2016.

While CBS and Fox have been far more vocal about their desire to land retrans dollars, Iger said those payments are adding up to a nice chunk of change for ABC. “We believe we’re getting paid per-sub cash retrans rates that are comparable to what other affiliate groups are seeing,” Iger told investors during Disney’s third quarter earnings call.

Disney’s media networks showed marked improvement in the three-month period ended July 2, as operating income for the segment rose 11 percent to $2.09 billion on revenues of $4.95 billion (up 5 percent year-over-year).

The cable networks unit, which includes ESPN, Disney Channel, and ABC Family, saw operating income grew 10 percent to $1.84 billion on revenues of $3.52 billion, up 7 percent from a year ago.

Disney’s cable group was led by ESPN, which posted higher affiliate revenue. “Year-over-year, ad sales revenues at ESPN were up 9 percent if you exclude the [2010 FIFA] World Cup and Game 7 of the NBA Finals,” said Jay Rasulo, the Disney CFO. With those two blockbuster events factored into the prior-year comparisons, ESPN’s Q3 ad sales revenue dipped 1 percent.

Despite the tough year-to-year comps, ESPN’s prime time ratings in the quarter were generally strong and steady. The sports giant averaged 1.71 million viewers in prime time, down 3 percent from the prior-year period, while the 18-49 and 25-54 demos dipped 4 percent.

Iger revealed that every week 107 million people “watch, listen, read, or log onto ESPN-branded media,” spending an average 6 hours and 35 minutes with ESPN's various brands. 

Disney Channel grew its ratings 5 percent in prime, while ABC Family was up 7 percent. The former boosted its deliveries of kids 6-11 by 11 percent, beating all comers with an average draw of 1.11 million, while ‘tweens 9-14 also improved 11 percent.

Disney’s broadcasting unit saw operating income increase 20 percent to $250 million, on revenues of $1.43 billion, down 1 percent. Ad sales revenue at ABC was up 2 percent in the quarter, as higher rates were somewhat undercut by make-goods.

Rasulo said that scatter continues to run “more than 25 percent above upfront levels…and in many cases, well above that level.”

Iger said that despite the economic firestorms breaking out in Washington and on Wall Street, Disney hasn’t seen any challenges to its core businesses. “During the past few days we have not seen any change in the pace of activity at our parks and resorts, advertising or consumer products businesses,” Iger told analysts. “With Disney, ESPN, Pixar, Marvel and ABC, we remain well-positioned for whatever economic conditions we face in the future.”

All told, Disney’s adjusted earnings for the quarter were $1.48 billion, or 78 cents a share, up from $1.33 billion, or 67 cents per share. Results beat analysts’ expectations of 73 cents a share. Revenue rose 7 percent to $10.7 billion.

In after-hours trading Tuesday, shares of Disney were down 46 cents, or 1.33 percent, to $34.13. The stock had gained $1.67, or 5.21 percent to close out Tuesday’s regular session at $34.75.