Upfront Divergence

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Both The Walt Disney Co. and News Corp. reported strong quarterly financial results last week, each fueled mainly by growth in their cable networks.

But the two media giants appeared to be split on the future of a stalwart in the cable and broadcast advertising universe, the upfronts.

News Corp. chief operating officer Peter Chernin defended the annual dog-and-pony show for advertisers at his company's fiscal second-quarter earnings conference call last Monday, vowing that the upfronts would remain intact, at least on the Fox networks.

UPFRONT HAS VALUE

“You're not going to see Fox abandon the upfront,” Chernin said on a conference call with analysts and reporters to discuss News Corp.'s fiscal second-quarter results. “We think it's a valuable part of the process for both sides.”

Chernin was responding to questions by analysts regarding what impact the Writers Guild of America strike was having on the media giant. While the upfronts may stay intact, Chernin said that News Corp. may develop fewer pilots, something that the media giant was investigating before the writers strike.

Disney CEO Robert Iger apparently didn't feel the same way, stating on his company's Feb. 5 earnings call that while the upfront sales process will likely remain intact, the party may not.

“Personally, I think the manner that the schedule is presented, with the bells and whistles on a big stage and a fair amount of hors d'oeuvres feels like a bit of an anachronism to me,” Iger said. “But those decisions will be ultimately made by the network and what they feel is right in terms of the best approach to marketing their schedule to advertisers and to the press.”

But Iger appeared to agree with Chernin regarding television pilots. Disney too is contemplating producing fewer pilots in the coming years.

The latest controversy surrounding the fate of the upfronts was first fueled by NBC Universal president Jeff Zucker, who proclaimed the advertisers showcase dead at the National Association of Television Programming Executives conference last month. The upfronts — which have become increasingly elaborate in their presentations — have come under closer scrutiny during the writers' strike, which has forced several media giants to look at their cost structures more carefully.

Iger's comments came on the heels of another strong quarter for Disney. For the period ended Dec. 29, revenue rose 9% to $10.5 billion and operating income was up 15% to $2.2 billion.

Cable network revenue increased 13% in the quarter to $2.4 billion, and operating income rose 27% to $586 million, due mainly to increases at ABC Family Channel and its domestic Disney Channels. Disney Channel's growth was primarily due to strong DVD sales of High School Musical 2 and higher affiliate revenue through contractual rate increases and subscriber growth.

News Corp. was no slouch either, reporting its highest ever quarterly operating income in the second quarter — about $1.4 billion, a 24% increase over a year ago. The company said the surge was fueled by double-digit growth in practically every one of its operating segments.

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