Cable Nets, Studio Drive Disney


The Walt Disney Co. reported strong fourth-quarter and year-end results fueled by increased performance at its studio-entertainment and cable-network units.

Revenue for the quarter was up 5% to $7.01 billion and operating income was up 15%. Net income more than doubled to $415 million (20 cents per share) from $175 million (9 cents) in the prior year.

For the full year, net income increased to $1.26 billion (65 cents per share) from $1.23 billion (60 cents) a year ago, on revenue of $27.06 billion (up 7%).

Studio entertainment drove most of those increases, with fourth-quarter operating income at that unit surging to $205 million from $75 million, helped by strong box-office and DVD sales. For the year, operating income at the movie division more than doubled to $620 million.

At the cable networks, year-end revenue was up 18% to $5.5 billion and operating income rose 15% to $1.17 billion. For the quarter, revenue at the networks increased 11% to $1.4 billion while operating income more than doubled to $377 million.

On a conference call with analysts, chief financial officer Tom Staggs said the reasons for the large quarterly increase at the cable networks were lower rights fees for its National Football League contract as it enters its final three years, higher ratings and strong advertising growth.

President Bob Iger took some time on the call to point out the benefits of its ESPN network -- currently locked in a bitter contract negotiation with Cox Communications Inc. -- but he backed off specific questions on ESPN’s negotiations with other operators.

Iger said ESPN has contracts with about 50% of its subscriber base through 2006, adding that the sports network was drawn reluctantly into the very public battle with Cox.

"Our preference always is to avoid being public, particularly in matters of controversy between ourselves and our distributors," he added. "But we felt that Cox had been so public on the issue for such a long time that it was imperative for us to respond, not only to the press and to Wall Street, but, most important, to the customers who we believe are extremely loyal to ESPN and demand it at a significant level from their cable operators."

Iger continued, "I happen to think overall that what Cox is doing is somewhat damaging to the business in general. I think it is driven mostly as a negotiating ploy on their part."

However, Iger said Cox’s ire over rate increases is not spreading to other MSOs. "What’s interesting is that Cox does not seem to be in synch with other large cable operators or with the NCTA [National Cable & Telecommunications Association]," he added.