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Strike Has Little Effect on Network Earnings

May 11, 2008  •  Post A Comment

Self-loathing writers take heart: The networks didn’t miss you that much.
The 100-day Writers Guild of America strike, which ended Feb. 12 and shelved most scripted television series’ new episodes for the rest of the first quarter, appeared to have little effect on the bottom line of the broadcast networks.
Broadcast parents such as Walt Disney, News Corp. and CBS all reported higher calendar first-quarter earnings after cutting costs at their broadcasting units.
News Corp.’s Fox Broadcasting Network seemed to miss the writers the least, as “American Idol” continued its ratings domination and Super Bowl XXXII on Feb. 3 was the most-watched TV program in 25 years. Those shows helped the company’s television operations boost profit for the most recent quarter by 53%, compared with a 16% increase in the parent company’s operating profit. Meanwhile, Fox’s cable networks such as Fox News Channel had ratings increases of more than 10%, the company said last week.
“We’re coming off a year where we’ve led the other networks by a bigger margin than in many, many years,” News Corp. Chairman Rupert Murdoch said on a May 7 conference call.
Cost-Cutting Measures
Unlike News Corp.’s Fox, which boosted its television revenue by 15% for the quarter, Walt Disney’s ABC network and CBS each were able to cut costs quickly enough to more than compensate for flat sales from the writers’ strike.
ABC, where revenue declined 2%, added sufficient overseas advertising revenue for shows such as “Grey’s Anatomy” and “Lost” to boost broadcast earnings 17%, the company said last week. Additionally, Disney’s cable networks’ operating earnings topped the $1 billion mark for the quarter, largely on advertising sales from higher ratings for its ESPN sports networks.
Meanwhile, CBS, which reported earnings April 29, said its television division’s operating profit jumped 15%, despite just a 1% increase in sales, on syndication and distribution agreements for its “CSI” franchise and “Everybody Loves Raymond.” The company also said political advertising sales helped compensate for the loss of ads from the strike.
The only network whose first-quarter profit increase may have been less than 10% was NBC, whose NBC Universal’s 3% operating earnings rise still outperformed parent General Electric, the company said April 11.
Cable Growth
Not surprisingly, the wealth spilled over to former CBS parent Viacom, whose Nickelodeon, Comedy Central and TV Land cable networks were beneficiaries of the programming dearth. Viacom said May 2 that first-quarter earnings jumped 33%, largely thanks to a media networks division whose revenue rose 15%.
In fact, the return of ABC’s scripted shows such as “Grey’s Anatomy” and “Lost” may put a damper on current quarter earnings, said Disney Chief Financial Officer Thomas Staggs on a conference call last week, citing “higher programming costs because of more original episodes.”
All of this may be why the studios seem to be taking a hard-line approach with the Screen Actors Guild, whose contract expires at the end of next month. Talks between SAG and the Alliance of Motion Picture & Television Producers broke down last week over what the studios say are the guild’s unrealistic expectations for residuals from DVDs and new media.
News Corp. President Peter Chernin, who, along with Disney Chief Executive Officer Robert Iger helped broker negotiations that led to the end of the writers strike, said last week that the studios weren’t rushing to resolve issues with the actors union.
“We need to allow companies to stay economically viable in the current environment and participate in new media and growth areas without constraints that would otherwise restrict us,” Mr. Chernin said in the News Corp. conference call. “We’re not going to seek a quick deal with anyone.”

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