Shares of The Walt Disney Company plunged in the final minutes of trading on Thursday after the company’s fiscal Q4 (through October 2) results were released 16 minutes ahead of schedule. Results were below the expectations of Wall Street analysts.
Apparently the quarterly news release was disclosed without authorization and Disney management says the incident is being investigated. After learning of the disclosure, Disney put the release out on BusnessWire at 3:44 pm ET (rather than the scheduled 4:00 pm) and posted it on the company’s own website.
The soft revenue figure, down 1% to $9.74 billion, was blamed on the timing or recognition of revenues for ESPN. Segment operating income for the entire company fell 7% to $1.72 billion. Free cash flow, however, rose 27% to $1.41 billion.
Revenues for the Cable Networks division fell 6% to $3.13 billion. Operating income was off 28% to $1.07 billion.
For the year, operating income for the Cable Networks division increased 5% to $4.47 billion as revenues rose 9% to $11.5 billion. The company credited growth at ESPN and the international Disney Channels, partially offset by a decrease in cable equity income. Also, there was one less week in the fiscal calendar.
Broadcasting revenues for fiscal Q4 were down 7% to $1.29 billion, but segment operating income shot up to $147 million from only $2 million a year earlier. The improvement was driven by lower programming and production costs at the ABC Television network, higher advertising revenues and improvement in net affiliate fees – partially offset by higher pension and postretirement medical costs. The advertising gains, by the way, were at both the network and the ABC O&O stations.
CFO Jay Rasulo spent some time in the company’s Wall Street conference call explaining the impact of the missing week on certain segments of the company, such as the Parks & Resorts and Media Networks.
“At ESPN advertising revenue was up 19%, driven by increases in the automotive, telecommunications and financial categories. Adjusting for the impact of the extra week in last year’s Q4, as well as the relative timing of major sports events, we estimate that ESPN’s ad revenue was up by 22%,” Rasulo told analysts.
For television the CFO said ad revenues at the O&O stations came in 15% ahead of a year ago, led by gains in automotive, political and financial categories. “Adjusted for the 53rd week, we estimate that TV stations’ ad revenue was up 26%. Adjusted for the 53rd week, ad revenues at the network were also up strongly, driven by improved ratings. Network scatter pricing came in 23% above upfront levels,” he said.
“Thus far in [fiscal] Q1 network scatter pricing is running 22% above upfront levels. Ad sales at both ESPN and our TV stations are pacing up by double digits versus prior year,” Rasulo said.
CEO Bob Iger was asked in Q&A about the refusal of ABC and the other three Big Four networks to clear their content on Google TV, but he refused to take the bait. “I don’t think I’m gonna address Google TV directly. We’ve not announced a deal with them at this point and I’m not going to say anything more specific about them,” he said.
But Iger did have some thoughts on the broader issue of new media platforms for Disney’s content. “We’ve been offering product to new services and new platforms and devices from almost the beginning. I guess, in a way, we led the way. We felt then and we still feel that it’s important to serve consumers on these new platforms, primarily to grow revenue and to take advantage of what’s pretty exciting new technologies. We also think it’s important to make legitimate product available to the marketplace on a well-timed and well-priced basis to fight piracy, which we don’t monetize at all. So, in essence, we’ve looked at these new opportunities as revenue – and incremental to revenue that we generate from these properties, as well as keeping us relevant and generally fighting piracy,” Iger said.