MUMBAI: US media conglomerate Disney has reported a fourth-quarter net profit of $782 million, or 36 cents per share, compared with $379 million, or 19 cents per share, a year before.
Disney’s revenue rose 14 per cent to $8.78 billion from last year’s $7.73 billion. Analysts expected a top line of $8.69 billion. Diluted earnings per share (EPS) for the fourth quarter increased 89% to $0.36, compared to $0.19 in the prior-year period, reflecting growth at studio entertainment, parks and tesorts, and media networks. For the year, EPS increased 34 per cent to $1.64, compared to $1.22 in the prior year, reflecting growth at each operating segment.
Disney president and CEO Robert Iger says, “Disney had a spectacular year, posting record revenues, record net income, and record cash flow. It is a result of the incredible creativity at our company.” Media networks revenues for the year increased 11 per cent to $14.6 billion and segment operating income increased 12 per cent to $3.6 billion. For the quarter, revenues increased 10 per cent to $3.7 billion and segment operating income increased 18 per cent to $883 million.
Operating income at cable networks increased $259 million to $3.0 billion for the year primarily due to growth at ESPN from higher affiliate and advertising revenues. Higher affiliate revenues were due to contractual rate increases and, to a lesser extent, subscriber growth while advertising revenue growth was driven by higher ratings and rates. The revenue increases at ESPN were partially offset by higher programming expenses primarily due to the new Major League Baseball (MLB) and National Football League (NFL) rights agreements and an additional NFL game.
Increased costs for the ESPN branded mobile phone service, which the Company recently announced would be transitioned into its existing wireless licensing business, and higher general and administrative costs also impacted results for the year.
For the quarter, operating income at cable networks increased $156 million to $854 million due to growth at ESPN. The increase at ESPN was driven by higher affiliate and advertising revenues and lower marketing expenses. Higher affiliate revenues were due to the recognition of increased deferred revenues and higher contractual rates. During the quarter, ESPN recognized $171 million of previously deferred programming commitment revenues compared to $84 million in the prior-year quarter.
These increases in ESPN operating income were partially offset by the higher programming expenses from the new MLB and NFL rights agreements and the additional NFL game.
Operating income at the broadcasting sector increased by $142 million to $606 million for the year driven by improved primetime performance at ABC and increased sales of Touchstone Television series, partially offset by higher costs at the Internet Group and radio, and the increased number and costs of pilot productions.
The improved primetime performance at ABC was driven by higher ad rates, strong upfront sales, and continued strength in ratings, partially offset by higher programming expenses. The increase in sales at Touchstone were driven by higher international syndication revenues and DVD unit volumes of dramas Lost, Grey’s Anatomy and Desperate Housewives as well as higher license fees for Scrubs, which completed its fifth season on network television.
Ad revenues for the year at broadcasting also benefited from the Super Bowl, however this revenue increase was essentially offset by related programming expenses.
The cost increase at the Internet Group was primarily due to the launch of Disney branded mobile phone services as well as the costs of other new initiatives. Higher costs at Radio included an impairment charge related to FCC licenses, primarily at ESPN Radio, reflecting an overall market decline in certain radio markets in which we operate.
However for the quarter, operating income at broadcasting decreased by $19 million to $29 million as improved performance at ABC and higher DVD unit sales of Touchstone Television series were more than offset by the increased costs associated with the roll-out of Disney branded mobile phone services and the FCC license impairment charge. The improved performance at ABC Television Network was driven by higher advertising rates, increased advertising spots from programming changes, and benefits from replacement programming for Monday Night Football, partially offset by the impact of lower ratings.
On the film front revenues for the year decreased by one per cent to $7.5 billion and segment operating income increased from $207 million to $729 million. Operating income growth was primarily due to improvements in worldwide theatrical motion picture distribution and worldwide home entertainment.
For the quarter, revenues increased by 33 per cent to $2 billion and segment operating income increased $527 million to $214 million. The increase in operating income was primarily due to improvements in worldwide theatrical motion picture distribution and worldwide home entertainment.
The improvement in worldwide theatrical motion picture distribution for the year was primarily due to lower distribution costs resulting from fewer domestic Miramax releases and the performance of Pirates of the Caribbean: Dead Man’s Chest. Other successful current year titles included The Chronicles ofNarnia: The Lion, The Witch and The Wardrobe and Disney/Pixar’s Cars.
Worldwide home entertainment growth for the year was primarily due to reduced marketing and trade programs, lower distribution costs driven in part by fewer returns, and improved margins from increased sales of television series DVD box sets, partially offset by a decline in unit sales resulting from a higher number of strong performing titles in the prior year. Significant current year titles included The Chronicles of Narnia: The Lion, The Witch and The Wardrobe, Cinderella Platinum Release, and Chicken Little, while prior-year titles included Disney/Pixar’s The Incredibles, National Treasure, Aladdin Platinum Release, and Bambi Platinum Release.


When slicing the kid‘s category and looking more specifically at the HSM segment, which is a core market for most players, the same is applicable. Cartoon Network reigns supreme but sibling Pogo appears to be battling it out with potential challenger for the pole position Hungama TV.
What will be under close scrutiny is whether this will create an upheaval that may trickle into the fourth quarter of the year. But with the combination of Disney Channel, Toon Disney, which is the clear leader in the South and Hungama TV (for whom its only a matter of time before it comes under Disney‘s wing), does pose a deadly combination. Also, given the benefits that Toon Disney‘s experiment with local feeds in the South have brought to the network, it won‘t be a surprise to see Disney Channel also tread the same localization path in due course.
All said and done, the kids category is experiencing dynamic nationwide growth and capitalising on this are advertisers that see it as a worthwhile proposition to hop on board.
Commenting on the pen brand categories that did not previously favour kids as a target as they would primarily use pencils, Hungama TV Senior VP marketing and communication Siddharth Roy said, “Presently we have close to 120 brands on board, out of which pens include Linc Pens, Add Pens, Cello Pens, and Reynolds. Predominantly pens did not advertise in the kid‘s space.”
Disney‘s Shah believes that their volume of commitment to the Indian market is seen in the their efforts to create an overall Disney brand experience through a 360 degree solution to consumers via multiple touch points that includes the contribution of every one of their businesses.
Category leader Cartoon Network forsees clear skies ahead for the kids category as a whole, “There is huge potential in the kids‘ segment and the Industry is definitely growing at a rapid pace. The viewership category has expanded. Plus, now it is not just about television/on-air programming or passive viewership – today kids‘ channels have the ability and option to offer viewers and clients multiple touch points and 360 degree solutions.”





