Disney’s Broadcasting Revenue Divergence In Fiscal Q2


With pre-market trading not as brutal as after-hours action had been for The Walt Disney Co.‘s stock, investors are now perhaps looking beyond shaky Disney+ OTT subscriber rolls and less-than-hoped for theme park attendance and revenue by looking at other segments of the company.

Among them, of course, is Broadcast. And, the fiscal Q2 tale shows network growth on a balance beam with owned-station revenue slowdowns.

Overall revenue for the Linear Networks within the Disney Media and Entertainment Distribution segment dipped by 4% to $6.75 billion from $7.03 billion in fiscal Q2 2021.

However, income for Linear Networks rose by 15% to $2.85 billion from $2.48 billion for the three-month period ending April 3, 2021.

The figures are inclusive of international channels, and Disney says the increase in operating income was due to growth at its Cable and Broadcasting businesses.

How was that achieved? At the cable networks, which include ESPN, lower programming and production costs were a factor; no college football playoffs in the quarter impacted expenses. And, even with the success of teen suspense drama “Cruel Summer,” fewer hours of original programming at FreeForm was a factor.

What can investors and the broadcast media industry ascertain from the results with respect to the free-to-air stations and the ABC network?

“The increase at Broadcasting was due to growth at ABC, partially offset by a decrease at the owned television stations,” Disney said.

For ABC, lower programming and production costs (due to a shift in the Academy Awards telecast due to the pandemic), coupled with higher affiliate revenue, were partially offset by lower advertising revenue. Affiliate revenue growth was due to an increase in contractual rates. ABC advertising revenue declined due to fewer impressions, reflecting lower average viewership, and the timing of The Academy Awards, partially offset by increased rates.

The decrease at the owned television stations was due to lower advertising revenue reflecting a decrease in political advertising and the timing of The Academy Awards.

Overall broadcasting results were higher than the company expected, CFO Christine McCarthy said on Disney’s quarterly earnings call for analysts and investors on Thursday afternoon.

But, we warned: Fiscal Q3 could be difficult for the linear networks due to a rise in programming and production expenses associated with ESPN.