Broadcast, Studios Fuel Disney Q3 - Multichannel

Broadcast, Studios Fuel Disney Q3

Cable lags as ad sales, subscribers decline
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Weeks after it won the battle for certain 21st Century Fox assets, The Walt Disney Co. reported strong revenue and operating income growth in its fiscal Q3, fueled mainly by its broadcast and studio units.

Overall, revenue rose 7% to $15.2 billion and operating income was up 5% to $4.2 billion, fueled mainly by big gains at its ABC broadcast network and its movie and TV production studios. Net Income rose 23% to $2.9 billion.

Disney won a weeks-long battle with Comcast last month over the Fox assets –cable channels FX, FXX and National Geographic, movie and TV studio 20 Century Fox, a 30% stake in online video company Hulu and a 39% stake in British satellite company Sky – after the cable company dropped out of the bidding. 

In a statement, Disney chairman and CEO Bob Iger said the addition of the Fox assets can only increase the company’s momentum.

“We’re pleased with our results in the quarter, including a double-digit increase in earnings per share, and excited about the opportunities ahead for continued growth,” Iger said in a statement. “Having earned the overwhelming support of shareholders, we are more enthusiastic about the 21st Century Fox acquisition than ever, and confident in our ability to fully leverage these assets along with our own incredible brands, franchises and businesses to drive significant value across the entire company.”

For the fiscal third quarter, most of the value was in the broadcast and studio segments. Broadcast revenue rose 11% in the period to $1.97 billion while studio revenue increased 20%. Broadcast unit operating income was up 43% in the period to $363 million, while studio operating income increased 11% to $708 million.

The story was different in the cable segment – revenue increased 2% to $4.2 billion and operating income decreased 5% to $1.4 billion.

Some of the cable unit’s troubles were due rising content and marketing costs at BAMTech, in which Disney bought a controlling interest in 2017, and lower advertising revenue at its Freeform cable channel. 

At ESPN, higher affiliate revenue was partially offset by higher programming costs and a decrease in advertising revenue. The lower advertising revenue was due to a decrease in impressions from lower average viewership, partially offset by higher rates. 

Affiliate revenue growth reflected contractual rate increases, partially offset by a decline in subscribers. Advertising revenue was adversely impacted by one less NBA final game.

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