BENGALURU: The Walt Disney Company Inc (Disney) reported 7 per cent revenue increase in Q2-2015 (quarter ended 28 March 2015, current quarter) to US$ 12461 million from US$ 11649 million in the corresponding year ago quarter. Net income during the current quarter improved 10 per cent to US$ 2108 million from US$ 1917 million reported for the quarter ended March 27, 2014 (Q2-2014).
Of the five segments that add to Disney’s numbers, three – Media Networks, Parks & Resorts and Consumer Products showed improvement in revenue, while the other two -Studio Entertainment and Interactive segments showed decline in revenues. Segment Operating Income from three – Parks and Resorts, Consumer Products, and Interactive increased, while segment operating income from Media Networks and Studio Entertainment declined in Q2-2015 as compared to Q2-2014.
“Our second quarter performance improved, marked by increased revenue, net income and EPS of US 1.23, demonstrates the incredible ability of our strong brands and quality content to drive results,” said Disney chairman and chief executive officer Robert A Iger. “The power of this winning combination is once again reflected in the phenomenal worldwide success of Marvel’s Avengers: Age of Ultron, which has opened at number one in every market so far.”
Segment Results
Media Networks
Media Networks revenues for the current quarter improved 13 per cent to US$ 5810 million from US$ 5134 million reported for Q2-2014. Operating Income from this segment declined 2 per cent to US$ 2101 million in Q2-2015 from US$ 2133 million in Q2-2014.
Two sub-segments – Cable Networks, and Broadcasting contribute to this segment.
Cable Networks reported a 11 per cent growth in revenue to US$ 4030 million in Q2-2015 from US$ 3633 million in Q2-2014, but reported a 9 per cent drop in Operating Income to US$ 1799 million in Q2-2015 as compared to the US$ 1974 million in Q2-2014. The company says that this drop in income was due to a decrease at ESPN, which was driven by higher programming and production costs, partially offset by growth in affiliate and advertising revenues. Programming and production cost increases were due to higher rights costs for college football programming and the addition of an NFL wild card playoff game and the SEC Network, which was launched in August 2014.
Disney says further that the increase in affiliate revenues was due to contractual rate increases, an increase in subscribers, taking into account the new SEC Network, and a reduction in revenue deferrals as a result of changes in contractual provisions related to annual programming commitments. ESPN advertising revenue growth was due to higher rates and units sold.
Broadcasting reported 19 per cent hike in revenue in the current quarter to US$ 1780 million from US$ 1501 million and reported a massive 90 per cent increase in operating income to US$ 302 million from US$ 159 million in the corresponding quarter of last year due to growth in affiliate fees, higher program sales and an increase in advertising revenues. These increases were partially offset by higher marketing costs for the launch of new series.
Parks and Resorts
Parks and Resorts reported 6 per cent growth in revenue to US$ 3760 million from US$ 3562 million in the corresponding year ago quarter and a 24 per cent increase in Q2-2015 operating income to US$ 566 million from US$ 457 million in Q2-2014. Operating income growth for the quarter was due to an increase at Disney’s domestic operations, partially offset by a decrease at its international operations.
Studio Entertainment
Studio Entertainment reported decline in revenue to US 1685 million in Q2-2015 as compared to the US$ 1800 million in Q2-2014, and segment operating income decreased 10 per cent to US$ 427 million from US$ 475 million in Q2-2014.
Disney says that lower operating income was driven by decreases in domestic home entertainment and international theatrical distribution, partially offset by a higher revenue share with the Consumer Products segment, reflecting performance of ‘Frozen’ merchandise in the current quarter, and lower film cost impairments. The decreases in domestic home entertainment and international theatrical distribution both reflected the performance of ‘Big Hero 6’ in the current quarter compared to ‘Frozen’ in the prior-year quarter.
Consumer Products
Consumer Products Q2-2015 revenue increased 10 per cent to US$ 971 million from US$ 885 million in Q2-2014 and operating income improved 32 percent to US$ 362 million from US$ 274 million in Q2-2014.
Higher operating income was primarily due to an increase at Disney’s Merchandise Licensing business due to the performance of merchandise based on ‘Frozen’ and, to a lesser extent, ‘The Avengers’.
Interactive
Revenue from this segment fell 12 per cent to US$ 235 million in Q2-2015 from US$ 268 million in Q2-2014, but segment operating income increased 86 per cent to US$ 26 million from US$ 14 million in Q2-2014.
Disney says that improved operating results were due to lower marketing and product development costs and the success of its mobile game ‘Tsum Tsum’, partially offset by lower ‘Disney Infinity’ performance and decreased sales of mobile game catalogue titles due to fewer titles in release. Lower marketing and product development costs were driven by fewer mobile game titles in development and the benefit of previous restructuring activities.