Weak Disney Showing, Maintaining Fair Value Estimate

Revenue for the quarter increased 7% year on year to $15.2 billion. Media networks revenue was up 3% due to growth at both cable networks and broadcasting segment. Affiliate fee revenue was up 5% in the quarter as higher rates continue to offset the 2% decline in subscribers. Disney has a number of distribution renewals over the next two years which will be a good test of the strength of ESPN. The subscriber decline has decreased from the 3% quarterly subscriber loss level of the last several quarters. The ad revenue at broadcast networks was up 3% as higher pricing offset lower impressions due to ratings. Management noted that scatter pricing is 23% above the upfront rates as we believe the ABS stations are benefiting from competitive primary races. Parks and resorts remains an area of strength with 6% growth despite only one week of Easter occurring in the quarter versus two last year. While domestic attendance was only up 1%, per capita spending growth of 5% was impressive as was the per room spending growth of 8%. Revenue at the studio segment improved 20% due to a strong theatrical quarter along with growth in television distribution. Segment operating income for the firm fell by 90 basis points to 30.3% as the revenue growth was more than offset by increased marketing and programming costs.

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