Tuesday, February 19

Disney’s Q2-16 shows 9.8% hike with $340 million revenue growth


Comparing to the last year’s quarter, the Walt Disney Company Inc. (Disney) reported 9.8% year-over-year (y-o-y) growth in the operating income, i.e., $3,822 million  for the second quarter ended on 2nd April, 2016 (Q2-16, current year).

Disney witnessed a growth of $340 million in the operating revenue in its current quarter versus the corresponding quarter of previous year.

Its Studio Entertainment segment earned operating revenue of $115 million, on the other side; its Media Networks segment earned operating revenue of $198 million.

ESPN, a part of Disney’s Media Networks segment’s sub-segment, witnessed a 12.3% y-o-y growth in its operating revenue. This growth at ESPN was partly offset by lower equity revenue from A&E Television Networks says Disney.

Disney reported 4.1% y-o-y increase in income in Q2-16 at $12,969 million as compared to $12,461 million in the previous year’s corresponding quarter. Increase in income of $508 million was contributed as $168 million by Disney’s ‘Parks & Resorts’ and $377 million increase by ‘Studio Entertainment’ segments.

Company speaks

“We’re very pleased with our overall results in Q2, which marks our 11th consecutive quarter of double-digit growth in adjusted EPS,” said Robert A. Iger, Disney’s Chairman and CEO,. “Our Studio’s unprecedented winning streak at the box office underscores the incredible appeal of our branded content, which we continue to leverage across the entire company to drive significant value. Looking forward, we are thrilled with the Studio’s slate and tremendously excited about the June 16th grand opening of the spectacular Shanghai Disney Resort.”

Segment numbers expects

Media networks

Media networks income in Q2-16 was nearly flat y-o-y (diminished to 0.3%) at $5,793 million compared to $5,810 million in Q2-15. The segment’s operating revenue grew 9.4% y-o-y to $2,299 million in the current quarter from the previous year’s corresponding quarter’s $2,101 million.

Disney Media Networks segment comprises of 2 sub-segments – Cable Networking and Broadcasting.

Cable Network’s income for the quarter declined 1.9% y-o-y to $3,955 billion from $4,030 million in Q2-15. Operating revenue in Q2-16 increased 12.3% y-o-y to $2,021 million from $1,799 million due to a growth at ESPN, partly offset by lower equity income from A&E.

The growth at ESPN was because of the benefit of lower programming costs and higher affiliate revenues, partly offset by a decline in advertising income.

Lower equity revenue from A&E was because of a decline in advertising income, higher programming expense and an unfavorable impact from the reconstruction of H2 channel to Viceland since Viceland is in a start-up chapter as per Disney.

Broadcasting income for the quarter grew 3.3% to $1,383 million from $1,780 million. Operating revenue of the sub-segment declined.

7.9% y-o-y to $278 million from $302 million because of lower operating revenue from program sales and higher programming and marketing costs, partly offset by advertising and affiliate income growth.

Lower operating income from program sales was due to a symbolic SVOD sale in the previous year’s quarter and a higher cost mix of programs sold in the current quarter.

The growth in programming costs showed a higher average cost to a new scripted programming and increased program cost write-offs. The growth in network advertising income was due to higher rates, partly offset by lower ratings.

Parks and Resorts

Parks and Resorts revenue for the current quarter grew 4.5% y-o-y y to $3,928 million from $3,760 million. Segment operating revenue in Q2-16 grew 10.2% y-o-y to $624 million from $566 million.

Operating revenue growth for the quarter was because of an increase in Disney’s domestic operations, partly offset by a decrease at its international operations.

Studio Entertainment

Studio Entertainment income for the current quarter grew 22.4% to $2,062 million from Q2-15’s $1,685 million. Segment operating revenue grew 26.9% from $427 million to $542 million.

Disney states that higher operating revenue was because of a growth in theatrical distribution results and increase in TV/SVOD distribution, partly offset by the impact of foreign currency translation because of the strengthening of the US dollar against major currencies of the world, declined home entertainment results and higher film cost impairments.

The growth in theatrical distribution results was because of the strong performance of ‘Star Wars: The Force Awakens’ and ‘Zootopia’ in the current quarter in comparison to the continuing performance in the prior year quarter of ‘Big Hero 6’ and ‘Into the Woods’, both of which were released domestically in the previous year’s first quarter. Higher TV/SVOD distribution results were directed by international growth.

The decrease in home entertainment results was mainly because of lower unit sales following the performance of ‘Big Hero 6’, ‘Frozen’ and ‘Marvel’s Guardians of the Galaxy’ in the previous year’s quarter in comparison to ‘The Good Dinosaur’, ‘Inside Out’ and ‘Marvel’s Ant-Man’ in the current quarter. The decline from lower unit sales was partly offset by the profit from ‘Star Wars Classic’ titles that are dispersed by a mediator.

Consumer Products & Interactive Media

Consumer Products & Interactive Media income for the current quarter declined 1.7% from $1,286 million to $1,186 million. Segment operating revenue declined 8% from $388 million to $357 million.

These declines were partly offset by higher licensing incomes. Increased licensing incomes were directed by higher income from Star Wars merchandise, partly offset by an adverse impact from the timing of minimum guarantee shortfall recognition and a decline in income from merchandise based on Frozen.