Disney Reports Drop In Profits, But TV Group Posts 11% Increase

Disney Reports Modest Drop In Profits, But Group Including ESPN Posts 11% Income Rise

Walt Disney Co. yesterday reported a "modest drop in its fiscal first-quarter profit," but the company's Media Networks group that includes ESPN and ABC "posted an 11% rise in operating income" to $724M from $655M a year earlier, according to Dawn Chmielewski of the L.A. TIMES. Analysts had been expecting "modest first-quarter results" for the TV group. But the growth of Disney Channel and "higher affiliate and advertising fees at ESPN helped drive a 5% gain in operating income for the cable networks," which rose to $544M for Q1, up from $517M a year earlier (L.A. TIMES, 2/10). Disney's "better-than-expected quarterly financial results" can be credited "mostly to television, a unit that CEO Bob Iger would like to wring more cash out of by way of ABC retransmission fees." Iger yesterday said, "It clearly would not be our preference to see that our signal was taken down and we'll do whatever we possibly can through negotiation to avoid that" (HOLLYWOOD REPORTER, 2/10). Iger said that ESPN's investments in programming such as the NFL and college football, as well as "innovative tech including 3D are paying off in the form of record '09 viewership and single-digit" ad revenue growth last quarter, "compared to a range of flat" to down 3% in the previous quarter. With ad revenue currently up 5% and ESPN "offering 'significant' local ad sales opportunities to ops -- more than any other net -- he intimated that affil fee hikes are likely going forward" (CABLEFAX DAILY, 2/10). At presstime, shares of Walt Disney Co. were trading at $29.47, down 1.24% from yesterday's close of $29.84 (THE DAILY).

RETRANS REDUX: Iger, in an interview with CNBC, said, "We're resolute in our desire to get retransmission consent fees. ... And it is our full intention to get paid for them. It would be our hope that we not face the need or the imminent threat of having a signal taken off the air, but we're also engaged in negotiations. ...We're resolute in our desire to get paid an appropriate amount of money for the stations that we provide to these multichannel operators." Iger said ESPN will seek a license fee increase above the $4 per sub per month it already gets, saying, "We believe we should be able to derive more revenue from subscriptions." Iger also said the ad market is rebounding at Disney's networks, including ESPN, but that the company is "still discounting to get the volume that we'd like in that business" (CNBC, 2/10).

REMIX TO TRANSMISSION: Media Valuations Partners Founder & Principal Larry Gerbrandt in a special to the HOLLYWOOD REPORTER writes under the header, "Retransmission Has The TV Biz Abuzz." The amount each network owner "will get will depend on the number of cable and satellite subs in their owned-and-operated markets, but the deals could result in cash inflows ranging" from $150-200M in the early years to $300-400M per network "over time" (HOLLYWOOD REPORTER, 2/10).