Disney, Viacom on Upswing

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Advertising sales continued to return
to form in the third quarter, with Viacom reporting a
strong 8% increase in domestic ad sales and double-digit
ad gains posted at The Walt Disney Co.

Viacom, which has lagged behind programming peers
the past few quarters, continued to close that gap. Discovery
Communications and News Corp.’s Fox Networks Group
cable channels each reported domestic ad sales growth of
16% in the September quarter. Viacom’s domestic ad revenue
rose just 1% in the first quarter and 4% in the second.

Higher ratings at MTV, Comedy Central and Nickelodeon
drove strong pricing in the scatter market, which continues
to be about 20% above what was sold at the upfront auction,
Viacom CEO Philippe Dauman said.

Disney continued to trend upward, with ad sales rising
19% in its fiscal fourth quarter and 22% for the full year at
the ESPN sports networks.

“The advertising marketplace is incredibly strong for
ESPN,” Disney CEO Robert Iger told analysts last Thursday.

Ad revenue was up 15% for the quarter and 26% for the
year at Disney’s TV stations, and scatter pricing at the ABC
Television Network was 23% above the upfront.

At ESPN, Disney Channel and other Disney cable outlets,
revenue rose 9% for the year but declined 6% in the quarter.
Disney blamed programming write-offs — $58 million
as part of its A&E Television Networks/Lifetime Television
partnership — and timing issues surrounding deferred revenue
at ESPN.

Affiliate fees rose 9% in the quarter and 10% for the year
at Disney. Having recently
wrapped a major carriage
deal with Time Warner Cable,
Disney said no significant
carriage agreements are
slated to expire in fiscal 2011.

Viacom also has no big
deals up for renegotiation
in the immediate future, but
Dauman told analysts he expects
fees to rise as much as
low double digits. He said
new digital opportunities
also could drive growth.

He pointed to the Epix premium channel’s distribution
deal with Netflix. He called it a key event, the first time a
non-traditional distributor has valued content at a higher
rate than what traditional distributors pay.

“We expect to continue to add incremental digital dollars,
not dimes, for our entire Viacom business in the future,”
Dauman said.

Viacom is making more content available for next-day
video on demand and expanding transactional VOD programming,
he said. It is also developing 3-D music, sports
and kids’ programming and interactive content with partners.

The company is looking to shrink its role in gaming,
though. Dauman said Viacom is talking to several interested
parties about selling Harmonix, the creator of the Rock
Band video game. “For us it is about focus,” he said.

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