Television

Disney’s Q1 numbers ride on parks and resorts segment

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BENGALURU: The Walt Disney Company (Disney) reported 3.8 per cent year-on-year (yoy) increase in revenue and 0.5 per cent yoy increase in operating income before taxes for the quarter ended 31 December 2017 (Q1 2018, the quarter under review) as compared with the corresponding year ago quarter (quarter ended 31 December 2016, Q1 2017). Net income attributable to Disney, however, increased by 78.4 per cent yoy. Diluted earnings per share (EPS) for the quarter increased by 88 per cent to USD 2.91 from USD 1.55 in the prior-year quarter. Excluding a USD 1.6 billion one-time net tax benefit associated with new US federal income tax legislation (tax act) and certain other items affecting comparability, EPS for the quarter rose by 22 per cent to USD 1.89 from USD 1.55 in the prior-year quarter.

Four segments—media networks, parks and resorts, studio entertainment, and consumer products and interactive media—contribute to Disney’s numbers. Except for the parks and entertainment segment, the other three segments reported a decline in segment income. Disney’s total revenue for the quarter under review was USD 15,351 million as compared with USD 14,784 million. Revenue from services increased by 4.7 per cent yoy to USD 12,984 million from USD 12,406 million while revenue from products declined by 0.5 per cent yoy to USD  2,367 million from USD 2,378 million.

Segment operating income in Q1 2018 was USD 3,745 million as compared to USD 3,725 million in Q1 2017. Net income attributable to Disney in the quarter under review was USD 4,423 million as compared to USD 2,479 million in Q1 2017.

Media Networks

Two divisions contribute to Media Networks numbers - cable networks, and broadcasting. Media networks' revenue for the quarter was flat at USD 6,243 million in Q1 2018 as compared to USD 6,233 million. Segment operating income declined 12.4 per cent yoy in Q1 2018 to USD 1,193 million from USD 1,162 million.

Cable networks revenue increased 1.5 per cent yoy to USD 4,493 million from USD 4,428 million, while income declined 0.7 per cent yoy to USD 858 million from USD 864 million. The company says that lower operating income was due to a loss at BAMTech and a decline at ESPN, partially offset by growth at the Disney channels and Freeform. The decrease at ESPN was due to lower advertising revenue, partially offset by affiliate revenue growth and lower programming costs. Lower advertising revenue was due to a decrease in impressions and lower rates. Growth at the Disney channels and Freeform was driven by higher affiliate revenue and lower marketing costs. Affiliate revenue growth was due to contractual rate increases, partially offset by a decline in subscribers.

The broadcasting division’s revenue for the quarter under review declined by 3 per cent yoy to USD 1,750 million in Q1 2018 from USD 1,805 million. Income decreased by 24.8 percent yoy to USD 285 million from USD 379 million. The company said that the decrease in operating income was due to lower advertising revenue, higher production cost write-downs, and a decline in programme sales income. These decreases were partially offset by affiliate revenue growth due to rate increases. Advertising revenue reflected fewer network impressions and lower political advertising at Disney-owned television stations, partially offset by higher network rates.

Parks and resorts

Revenue from parks and resorts for the quarter increased by 13.2 per cent yoy in Q1 2018 to USD 5,154 million from USD 4,555 million while segment operating income increased by 21.4 per cent yoy to USD 1,347 million. The company said that operating income growth for the quarter was due to increase at Disney’s domestic parks and resorts, cruise line and vacation club businesses as well as at Disneyland Paris.

Domestic results benefited from the comparison to the impact of Hurricane Matthew, which occurred in the prior-year quarter. Higher operating income at domestic parks and resorts was driven by guest-spending growth and

an increase in attendance, partially offset by higher costs. Guest-spending growth was due to higher average ticket prices, food, beverage and merchandise spending and average daily hotel room rates.

Studio entertainment

Studio entertainment revenue dipped by 0.6 per cent yoy to USD 2,504 million in Q1 2018 from USD 2,520 million and segment operating income declined 1.5 per cent yoy to USD 829 million from USD 842 million. The company said that an increase in theatrical distribution results was more than offset by decreases in home entertainment and TV/SVOD distribution results as well as lower income from consumer products and interactive media segment revenue share.

Consumer products and interactive media

Revenue declined by 1.8 per cent yoy to USD 1,450 million in Q1 2018 from USD 1,456 million and segment operating income declined by 3.9 per cent yoy to USD 617 million from USD 642 million. The company said that operating income reduced due to decreases at Disney’s merchandise licencing and retail businesses, partially offset by an increase at its games business. The decrease in merchandise licencing was due to unfavourable timing of minimum guarantee shortfall recognition and lower licencing revenue from merchandise based on Frozen and Finding Nemo/Dory, partially offset by increases from merchandise based on Cars and Star Wars. Disney’s retail business was affected by unfavourable foreign currency fluctuations. The increase at Disney’s games business was due to licencing revenue from Star Wars Battlefront II, which was released in the current quarter, whereas there was no comparable release in the prior-year quarter.

Company speak

“The strategic investments we’ve made have driven meaningful growth over the long term, and we remain confident in our ability to continue to deliver significant shareholder value,” said  Disney’s chairman and CEO Robert A Iger, “We’re excited about what lies ahead, with a robust film slate, the launch of our ESPN direct-to-consumer business, new investments in our theme parks, and our pending acquisition of Twenty-First Century Fox.”

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