UPDATED: 8:00 p.m. ET
The Walt Disney Co. reported a double-digit profit gain in the third quarter, driven by gains at its TV networks, led by ESPN.
Net income rose 11% to $1.48 billion, or 77 cents a share, from $1.33 billion, or 67 cents a share, a year ago.
Revenues rose 7% to $10.7 billion.
On the company's earnings call, CEO Bob Iger started out by addressing the question of whether the company is seeing a downturn in the economy. "Given the economic news of the past week, I'm sure there was interest in what we are seeing, and during the past few days, we haven't seen any change in the pace of activity in our Parks and Resorts, advertising or Consumer Products businesses," Iger said. "We, of course, continue to closely watch key trends in these areas."
Disney's Media Networks Group, which includes ABC and ESPN, reported operating income of $2.1 billion in the quarter, up 11% from a year ago. Revenues were up 5% to $4.9 billion.
Income from Disney's cable networks was up 10% to $1.8 billion on a 7% increase in revenues to $3.5 billion.
Disney credited its gain in cable to growth at ESPN, higher equity income from its stake in A+E Networks and an increase at the worldwide Disney Channels. Operating income was off at ABC Family because of higher programming costs.
"The growth in our Media Network segment in Q3 was primarily driven by ESPN," Iger said. "ESPN remains incredibly well positioned today given its ability to deliver comprehensive, high quality coverage of major sports events, the value it provides to fans, advertisers and multi-channel operators, and its disciplined approach to programming acquisition."
Iger added that the value of sports was being reflected in the advertising marketplace. In this year's upfront "ESPN enjoyed all-time highs in both pricing and total dollars committed, with tremendous strength in our upfront NFL and college football sales," he said.
In the third quarter, advertising revenues at ESPN were down 1% compared to last year, when the network aired the World Cup and a Game 7 for the NBA Finals. Without those events, ESPN's ad sales would have been up 9%, said Jay Rasulo, Disney's CFO.
Ad sales at ESPN and ABC family are pacing up versus prior year so far in the fourth quarter, Rasulo said.
Disney's broadcasting group had a 20% increase in operating income to $250 million even though revenues were down 1% to $1.4 billion. The company said ABC had lower programming and production costs in primetime because it aired less scripted programming and more reality shows. ABC also cut costs for news and daytime programming.
In the third quarter, ABC's advertising revenues were up as lower ratings were more than offset by higher prices. "Thus far in Q4, ABC Network's scatter pricing is running more than 25% above upfront levels with some deals priced well above that level," Rasulo said. The company did not discuss the results of ABC's upfront ad sales.
Iger said that retransmission payments from cable operators for programming on ABC's owned stations at rates comparable to what other broadcast networks are getting. ABC is also collecting fees from 60% of its affiliate footprint. "To give you some perspective on what this means financially, we now expect annual revenue streams to total between $400 million and $500 million by fiscal 2015," he said.
Rasulo said that ad revenue at ABC's TV station group was down 8% as a result of lower political spending in the quarter and the sale of stations in Flint and Toledo. Excluding the effect of these items from the prior year, ad revenue was up 2%. ABC station rang up $55 million in political ad spending in the second half of 2010, which means comparison will be tough in the fourth quarter as well.
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