ABC Drags Disney Earnings

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Revenue was up 6% at The Walt Disney Co. for the fiscal fourth quarter but operating income, dragged down by sluggish performance at its broadcast network and movie studio, fell 4% despite strong growth at its cable operations.

Revenue at its Media Networks division—which includes the ABC broadcast network as well as cable operations ABC Family, ESPN and the Disney Channel—rose 4% to $4.2 billion in the period. But operating income at the media division was flat at $1.1 billion. And a closer look at the media division showed that while revenue growth at its cable networks was similar to broadcast—5% versus 4%—cable vastly outperformed broadcast in operating income. The cable segment reported an 11% increase in operating income during the period to $1.2 billion, while broadcast reported an operating loss of $150 million in the period.

At its Studio Entertainment division, revenue dipped 5% to $1.45 billion in the quarter but operating profit plunged 42% to $98 million, reflecting fewer releases this year and increased marketing costs.

On a conference call with analysts, Disney CEO Bob Iger said that the advertising slowdown is beginning to creep into the national market.

“On the advertising front, we have seen significant softening in the local ad market as well as a slowing of the pace in national advertising,” Iger said on the call. Although Iger did not elaborate, he seemed to put more emphasis on softening in the national broadcast market as opposed to cable.

“On the national level, ad pacings at ABC and to a lesser extent ESPN, are off from last year as spending in the auto, electronics, financial and other categories has slowed,” Iger said. “I would also note that overall broadcast television ratings are down so far this season, and ABC is no exception.”

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