EARNINGS CALL

Retrans Grows For ABC As Ad Sales Slip

Disney's legacy ABC businesses were down for the quarter, although the company didn’t offer specific details. A bright spot was an increase in affiliate revenue (retrans for the O&O stations and the ABC Network’s share of what affiliates received), which was attributed to higher rates. But the broadcasting segment had lower advertising revenues for the quarter, with ad sales down for the O&Os and a drop in average network viewership.

It may look like “Wow!” numbers as The Walt Disney Co. reported a 34% increase in fiscal first quarter revenues (through Dec. 29, 2019) for its Broadcasting segment to $2.6 billion and operating income for the segment up 41% to $575 million. But there’s a simple explanation. The gains were due to consolidation of results from Disney’s acquisition of 21st Century Fox businesses — primarily program sales as far as broadcast television was concerned — and some accounting changes.

The legacy ABC businesses were down for the quarter, although the company didn’t offer specific details. A bright spot was an increase in affiliate revenue (retrans for the O&O stations and the ABC Network’s share of what affiliates received), which was attributed to higher rates. But the broadcasting segment had lower advertising revenues for the quarter, with ad sales down for the O&Os and a drop in average network viewership. The latter was partially offset by high ABC Network rates.

The only mention of the station business in the company’s Wall Street conference call came from CFO Christine McCarthy. She noted a decline in political advertising revenues for the O&Os from a year earlier, but didn’t offer any details.

Nearly all of the questions from Wall Street analysts concerned the launch of the Disney+ streaming service, which CEO Bob Iger had hailed as “enormously successful” with 26.5 million subscribers as of the quarter’s end and 28.6 million as of Monday. Building on that U.S. success, the company is preparing to launch in other countries as well.

Meanwhile, Disney is preparing to take a revenue hit in the current quarter due to the coronavirus outbreak in China, where the company has closed its two theme parks. McCarthy told analysts that if the parks remain closed for two months the revenue loss should total $135 million for Shanghai Disney and $40 million for Hong Kong Disneyland. However, Disney officials said the disease has not impacted foreign visitors coming to Disney World in Florida and Disneyland in California.


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