Disney CFO Says Ad Demand Is Strong

The Walt Disney Co. quarterly conference call on Wednesday afternoon was dominated by analyst questions about the Disney+ streaming service, where subscription numbers are underperforming some expectations. Disney CEO Bob Chapek insisted that the streaming service is still on track — and that the business is being managed for the long-term, not quarter-to-quarter.

For the advertising-supported businesses, both linear and on-demand, CFO Christine McCarthy told analysts that the advertising market is strong across the portfolio.

“The sports market is strong. It’s really being driven by football, at both the college and professional level, NHL and the NBA. We are seeing some impact from supply chain issues impacting certain sales categories. And the two that I would just call out are autos and technology — those are for obvious reasons that we all know about,” McCarthy said.

The CFO had earlier commented on the 5% drop in fiscal fourth quarter revenues for the company’s domestic channels to $5.4 billion.

“Lower results at broadcasting were driven by lower results at ABC and the owned television stations. At ABC, the decrease was primarily driven by higher marketing, and programming and production costs, reflecting a higher number of series versus the prior year, due to last year’s production delays — as we noted in the guidance we gave last quarter — partially offset by higher affiliate revenue,” she said.

“The decrease at the owned television stations was due to lower advertising revenue, reflecting comparisons to the 53^rd week [in Disney’s accounting for its previous fiscal year] and strong political advertising in the prior year,” McCarthy said.

At one point in the Q&A, the CFO was asked about the impact of inflation.

“Inflationary pressures are something we are all looking at and trying to assess, and think about how do we manage through it,” she said, indicating that the issue is top-of-mind for CFOs and management teams at all companies. Some parts of Disney, she noted, have already been impacted.

She noted the rising prices for content, due to the competition for talent “and everything that’s involved in production.”

“Where we see it at our parks business is primarily through the hourly wage inflation that we’ve seen in contract renegotiations and our commitment to paying our park workers well,” she said. McCarthy also noted the increasing costs of goods, which has prompted the company to look at such things as cutting food serving sizes to avoid increasing price tags. She also noted that technology is being used more and more to reduce operating costs.

Disney execs were celebrating, though, that all of the company’s parks worldwide are finally open after pandemic shut-downs, although some remain at reduced capacity. Parks & Experiences revenues shot up 99% in the quarter to $5.5 billion and the division returned to profitability.