Profits jumped at Walt Disney Co. as its cable networks
including ESPN turned in a strong performance.
Second-quarter net income rose 32% to $1.5 billion, or 83
cents a share, from $1.1 billion, or 63 cents a share a year ago.
Revenues rose 10% to $1.06 billion.
Disney's stock was already at record levels and the earnings
report exceeded analysts' expectations.
"Our results reflect our successful strategy, the
strength of our brands and the value of our high-quality creative content, all
of which continue to drive long-term growth and shareholder value," CEO
Bob Iger said in a statement.
Disney's Media Networks group had an 8% increase in
operating income to $1.9 billion as revenue rose 6% as cable gained while
broadcast dragged.
The cable networks' operating income rose 15% to $1.7
billion thanks to growth at ESPN, which had increased affiliate revenues and
advertising sales. Those were partly offset by increased programming and
production costs.
Cable revenues were $3.5 billion, up 9%. Speaking on the
company's earnings call with securities analysts, Disney CFO Jay Rasulo said
that "the performance of our cable business in the second quarter reflects the
benefit of new affiliate agreements resulting in total cable affiliate revenue
growth in the low teens."
ESPN's ad revenue was up 4%. In the current quarter, ESPN ad
sales are pacing up more than 10%, Rasulo said.
Operating income fell 40% to $138 million for broadcasting
because of higher primetime programming costs and a decrease in ad revenue at
ABC. The decrease in network ad revenue was due to lower ratings, partly offset
by higher rates and increased online advertising. The network had higher
write-offs for underperforming shows than last year. Broadcast revenues were
down 2% to $1.5 billion. Ad revenue at the local stations was up.
So far this quarter, scatter prices at ABC are up 25% from
upfront levels, Rasulo said. Ad sales at the TV stations are pacing down by single-digits.
On the conference call, one analyst noted that Disney appeared
to be hitting all cylinders except broadcasting and asked Iger how he hoped to
turn it around.
Iger said that local TV markets appear to be getting
smaller. "Obviously that's an issue," Iger said. On the broadcast front, he
praise the ABC management team but said "we could use a few more nets and
certainly hits we own. It's that simple."
Iger added that he's seen the pilots for next season and "I
am reasonably encourage by what I have seen, actually more than reasonably
encourage. I am very encouraged by what I have seen and hopeful that the year
ahead will deliver more value for us than the year before."
Disney's
theme parks increase operating income by 73%, studio entertainment swung from a
loss to a $118 million profit, and consumer products rose 35%, contributing to
the quarter's results.
