Disney
president and CEO Robert Iger says, “We had an outstanding quarter financially
and creatively at The Walt Disney Company. This performance demonstrates how The
Disney Difference gives us a critical and sustainable market advantage. That difference
centers on our proven ability to create high-quality content across our wide-ranging
distribution and promotional platforms, allowing us to leverage our hits and grow
our company.”
Media
networks revenues for the quarter increased by five
per cent to $3.6 billion and segment operating income
increased by 14 per cent to $1.3 billion.
Operating
income at cable networks increased by 14 per cent
to $1.1 billion for the quarter primarily due to growth
at ESPN and, to a lesser extent, higher income from
its cable equity investments. The growth at ESPN was
driven by higher affiliate revenue primarily due to
contractual rate increases and subscriber growth,
and advertising revenues driven by higher rates, partially
offset by higher programming,
administrative
and marketing costs.
Higher
programming costs were driven by increased rights
costs arising from college basketball contract renewals.
Growth from cable equity investments was primarily
due to higher affiliate and advertising revenue at
Lifetime and A&E.
Operating
income at broadcasting increased by 17 per cent to
$223 million for the quarter, primarily due to the
strong performance of ABC Studios productions in international
markets, led by Grey’s Anatomy and Lost.
This growth was partially offset by the impact of
the Writer’s Guild of America strike which limited
the airing of original scripted programming in primetime
on ABC, resulting in lower ratings and advertising
revenues.
The
negative impact of the strike on ad revenue was partially offset by higher ad
rates and lower programming costs due to the reduction in hours of original scripted
programming.
Film
revenues for the quarter increased by 18 per cent to $1.8 billion and segment
operating income increased by 61 per cent to $377 million. Segment operating income
growth was primarily due to increases in domestic home entertainment and worldwide
theatrical distribution.
The
growth in domestic home entertainment was driven by higher unit sales reflecting
the performance of current quarter titles, which included Enchanted, Game
Plan and No Country for Old Men as compared to Peter Pan Platinum
Release, The Guardian and The Prestige in the prior-year quarter.
The
increase in worldwide theatrical distribution was
driven by lower distribution expenses due to significant
marketing costs in the prior-year quarter for Meet
the Robinsons, which was released at the end of
March 2007, and the US performance of current quarter
titles led by the continued success of National
Treasure 2: Book of Secrets and the release of
Hannah Montana/Miley Cyrus: Best of Both
Worlds. In international markets, the improvement
was primarily due to the strong performance of Enchanted
and National Treasure 2: Book of Secrets.
Consumer
products revenue for the quarter increased 10 per
cent to $551 million and segment operating income
decreased 14 per cent to $107 million. Lower segment
operating income for the quarter was primarily due
to lower recognition of minimum guarantee revenues
at merchandise licensing and decreased revenue from
licensed product at Disney Interactive Studios reflecting
our continuing transition towards self-published titles.
These
decreases were partially offset by higher earned royalties
at Merchandise Licensing and higher sales of self-published
titles at Disney Interactive Studios. Higher earned
royalties were driven by sales of Hannah Montana
and High School Musical merchandise and increased
sales at Disney
Interactive Studios reflected the performance of Turok
and High School Musical in the current quarter
compared to Meet the Robinsons and Spectrobes
in the prior-year
quarter.
