ESPN's Affiliate Fees, Ad Revenue Lift Disney's Q3 Earnings Ahead Of Expectations
Disney reported its Q3 results yesterday, and while marketing costs for the film "The Long Ranger" "held back quarterly profits at the company," higher advertising fees at ESPN "helped lift earnings above analyst expectations," according to Matthew Garrahan of the FINANCIAL TIMES. Higher affiliate fees and advertising revenue growth at ESPN "ensured the media networks division increased profits" in the quarter by close to 10% year-over-year (FINANCIAL TIMES, 8/7). In N.Y., Brooks Barnes notes Disney's Media Networks "drove the company’s financial performance," as the unit's operating income rose 8% to $2.3B. ESPN "benefited from contractual rate increases from cable providers and higher advertising sales, although programming costs also climbed." In particular, ESPN "had to pay more" for MLB rights. ABC's operating income and a "string of local television stations" fell 21% to $213M, because of "higher prime-time programming costs, lower sales of reruns and a decline in advertising revenue tied to a decline in ratings" (N.Y. TIMES, 8/7). USA TODAY's Matt Krantz noted the Media Networks division is Disney's "biggest, accounting for 46% of revenue" (USATODAY.com, 8/6). At presstime, shares of Disney were trading at $65.75, down 1.9% from the close yesterday (THE DAILY).
IGER ON ESPN: BROADCASTING & CABLE's Jon Lafayette noted Disney Chair & CEO Bob Iger "discussed ESPN's result after a quarter in which its ratings fell 30%." Iger said, "We remain confident in ESPN's value and its position as the Number One brand in sports over the long-term." Disney CFO Jay Rasulo said that ESPN's cash ad sales were "up 9% in the quarter, but its reported ad revenue was up only 3%, because 'the increase in cash ad sales was partially offset by lower ratings.'" Those ratings "were mainly due to fewer NBA regular season games and lower ratings for NBA playoff games than a year ago." Rasulo said that ESPN's cash ad sales so far in Q4 "are pacing up 11%." Iger said that ESPN had a "strong upfront, in terms of price increases and overall revenue." He added the nets "did not detect any impact whatsoever for any new competitive forces, including Fox Sports 1." Iger noted that as football season approaches, ESPN has "new advertising opportunities on its Watch ESPN app, which is sold separately from the linear networks." Iger: "Those sales are relatively small, in the tens of millions at this point, but we believe they will continue to grow" (BROADCASTINGCABLE.com, 8/6). Iger indicated that he "expects ESPN to renew its deal to carry NBA games as the current agreement runs through the 2015-16 season, but negotiations may begin well in advance." Iger added that while the league is "crucial to ESPN, it also offers an 'important platform' for the NBA" (MEDIAPOST.com, 8/6).