Up quarter for Disney


Television and movies lagged as The Walt Disney Company reported an up quarter despite the tough economy. For the entire company, revenues rose 2% to $9.24 billion and earnings per share rose 16% to 66 cents.

The Media Networks division was the strongest performer, with revenues up 8% to $4.12 billion and operating income up 9% to $1.47 billion. The improvement, though, all came on the cable side, with Broadcasting held down by the soft ad market and the effects of the writers strike.

Revenues for the Cable Networks were up 12% to $2.59 billion and operating income rose 14% to $1.21 billion. ESPN was the star driver of revenue, along with the international Disney Channels and Disney’s equity investments in various other cable channels.

Broadcasting revenues were flat at $1.53 billion and operating income down 11% to $260 million. That was blamed on higher production costs, amortization related to syndication programs and lower ad sales by the O&O station group. CFO Tom Staggs told analysts that ad revenues for the O&O stations were down in the mid single digits for the quarter, mainly due to softness in the automotive category. “At the same time, we’re extremely pleased with our station management team’s performance. Eight of our 10 stations are #1 in their markets and have gained market share in the face of a tough environment,” he said.

At the ABC Network, lower ratings were more than offset by higher ad rates and lower programming costs. The latter, of course, was related to the WGA strike. That, not surprisingly, prompted analysts to ask CEO Bob Iger about the stalemated talks with SAG. He insisted that the terms the studios have offered to the Screen Actors Guild are “more than fair” and that they weren’t going to give SAG terms on new media production that are different from those already agreed to by the other unions.

“I don’t really have a prediction in terms of either how this impasse might be broker or where things might go, with the caveat that by and large at this point it’s not having a particular damaging impact on our business because we’ve decided to continue to move forward with at least a number of our productions – until such time as we feel that’s not prudent. We’re going to basically continue to approach our business in that way. I don’t think that there is any work stoppage imminent, by the way. I think it would be a very, very difficult thing for a guild in this environment to take on and probably rather unpopular as well, but I don’t speak for that guild and I can’t really predict what they’re going to do. But I think it would be unlikely that you’re going to see another work stoppage in the near term,” Iger told analysts.

On another subject, Iger expressed confidence in Disney’s new media strategy. He said streaming ABC shows on the Internet is increasing consumption of that content. “I don’t think we’d be getting as much consumption of the ABC programs if the only place you could see them is on the ABC Television Network,” he said. Yes, Iger admitted that monetization is still “somewhat an open question,” he believes that the new media deployment is already driving incremental revenue.