Walt Disney Co. President and Chief Operating Officer Robert Iger said last Thursday he expects ABC to begin seeing the financial benefits of its surprising collection of hit shows starting in January. He also said the network could be on track to exceed earlier fiscal-year predictions of break-even to possibly produce a profit.
Speaking during the company’s fiscal fourth-quarter and full-year earnings call, Mr. Iger acknowledged that ABC during the upfront season “did not anticipate the success” it has had with “Desperate Housewives,” “Lost,” “Extreme Makeover: Home Edition” and “Wife Swap” and thus when selling ad time last spring was modest in the rates it charged and in the number of units it sold during those programs.
“The upside will be post-January,” Mr. Iger said, adding that a lot rests on the strength of the overall economy. “We’ve got a lot of high-quality inventory to sell in January. We will find some real upside there.”
If ABC does in fact hit break-even or even squeezes out a profit, it would be a feather in the cap of Mr. Iger, who as the former top executive at ABC, personally got involved in steering a turnaround at the network after its ratings collapse several years ago. Mr. Iger is in line to replace Disney CEO Michael Eisner, who announced in September that he will retire once his current contract expires in 2006. The Disney board is expected to make a decision by June.
Already the improvement at ABC is having an effect. Disney, which came under fire during most of 2004 for years of lackluster results, staged a comeback strong enough for one Wall Street analyst to declare Disney the top stock pick of the media companies, in part because of improvements at ABC.
Mr. Iger said Disney continues to hold talks with the National Football League about a contract renewal, but he declined to provide details.
Disney saw its fiscal fourth-quarter profit surge 24 percent to $516 million from $415 million a year ago, driven by strong results at the company’s media networks and theme-park divisions. Revenue climbed 8 percent to $7.5 billion.
For the year ended Sept. 30, Disney’s profit climbed 85 percent to more than $2.3 billion on a 14 percent rise in revenue to $30.8 billion.
The media networks unit, which includes cable channels ESPN and Disney Channel as well as ABC, reported a segment profit increase of 79 percent to $2.2 billion for the year on an 8 percent revenue jump.
ESPN proved to be a big driver of growth for the year, thanks to higher affiliate-fee and advertising revenue and lower programming costs associated with lower amortization for the network’s NFL contract. The domestic and international Disney Channels made a significant contribution as well, fueled by higher advertising revenue. ABC Family, which has struggled in the past, booked higher ad revenue as well and also got a boost from a favorable bankruptcy settlement with a cable operator in Latin America.
Those factors led the cable channels to post a 64 percent surge in segment profit to $1.9 billion on a 16 percent increase in revenue.
Meanwhile, ABC posted a segment profit of $245 million, compared with a year-earlier profit of $37 million, while revenue slipped 1 percent to $5.4 billion. Disney attributed the results to lower programming costs and higher advertising revenue.
Among the nontelevision divisions, Disney’s theme-park unit saw operating income rise 17 percent to $1.1 billion on a 21 percent increase in revenue to $7.8 billion for the 12-month period. Studio entertainment segment profit rose 7 percent to $662 million and revenue climbed 18 percent to $8.7 billion, as success earlier in the fiscal year from “Finding Nemo” and “Pirates of the Caribbean” offset weaker results later in the fiscal year. Consumer products profit increased 39 percent to $534 million, while revenue climbed 7 percent to $2.5 billion.