BENGALURU: The Walt Disney Company Inc (Disney) reported 7.5 percent YoY increase in consolidated revenue at $52,465 million for the year ended October 3, 2015 (FY-2015, current year) as compared to the $48.813 million reported for the year ended September 27, 2014 (FY-2014, previous year). Net income in the current year increased 11.7 percent YoY to $8.382 million from $7,501 million.
“We had a strong quarter, with adjusted EPS up 35 percent, completing our fifth consecutive year of record performance,” said Disney chairman and chief executive officer Robert A Iger. “In Fiscal 2015 we delivered the highest revenue, net income and adjusted EPS in the Company’s history, reflecting the power of our great brands and franchises, the quality of our creative content, and our relentless innovation to maximize value from emerging technologies.”
For the quarter ended October 3, 2015 (Q4-2015, current quarter), consolidated revenue increased 9.1 percent YoY to $13.512 million as compared to $12,389 million in the quarter ended September 27, 2014 (Q4-2014). Net Income in Q4-2015 increased 7.3 percent to $1,609 million as compared to $1,499 million.
Segment Results
Four of the five Disney’s segments – Media Works, Parks and Resorts, Studio Entertainment and Consumer Products reported growth in revenue in FY-2015 and Q4-2015 as compared to FY-2014 and Q4-2014 respectively, while the fifth segment – Interactive – reported decline in revenues. However, all the five segments reported growth in segment operating income in the current year and quarter as compared to the previous year and year ago quarter respectively.
Media Networks
Media Networks revenue in FY-2015 increased 10 percent to $23,264 million from $21,152 million in the previous year. Segment Operating income increased 6.4 percent in the current year to $7,793 million as compared to $7,321 million in FY-2014.
The segments revenue in the current quarter increased 11.7 percent YoY to $5,286 million from $5,217 million. Operating income for the segment increased 26.6 percent YoY to $1,819 million from $1,437 million.
Disney says that Operating income growth at Media Networks was driven by higher affiliate fees, increased advertising revenue at ESPN and the ABC Television Network and higher operating income from program sales. These increases were partially offset by an increase in programming and production costs at ESPN and, to a lesser extent, the Disney Channels and the ABC Television Network.
Two sub-segments contribute to Disney’s Media Networks – Cable Networks ; and Broadcasting.
Cable Networks
Cable Networks revenue in FY-2015 increased 9.7 percent to $16,581million from $15,110 million in the previous year. Segment Operating income increased 4.9 percent in the current year to $6,787 million as compared to $6,467 million in FY-2014.
The sub-segments revenue in the current quarter increased 12.4 percent YoY to $4,245 million from $3,776 million. Operating income for thesub- segment increased 29.8 percent YoY to $1,655 million from $1,275 million.
For Q4-2014, Disney says that Operating income at Cable Networks increased due to an increase at ESPN and, to a lesser extent, A&E Television Networks (A & E) and the Disney Channels. The increase at ESPN reflected higher affiliate and advertising revenues, partially offset by an increase in programming costs. Affiliate revenue growth was driven by contractual rate increases and an increase in subscribers. The increase in subscribers was due to a full quarter of the SEC Network, which launched in August 2014, partially offset by a decline in subscribers at certain of Disney’s networks.
Growth in advertising revenue reflected higher units sold, partially offset by lower ratings. Higher programming costs reflected a full quarter for the SEC Network, additional rights for the US Open Tennis tournament and contractual rate increases for Major League Baseball and NFL rights, partially offset by the absence of rights costs for NASCAR.
Higher equity income from A & E was due to lower programming and marketing costs, partially offset by lower advertising and affiliate revenue. The increase at Disney Channels was driven by higher affiliate revenues, partially offset by higher programming costs. Affiliate revenue growth reflected contractual rate increases domestically and subscriber growth internationally. The programming cost increase was driven by higher costs for original programming, including more hours of new series in the current quarter.
Broadcasting
Cable Networks revenue in FY-2015 increased 10.6 percent to $6,683million from $6,042 million in the previous year. Segment Operating income increased 17.8 percent in the current year to $1,006 million as compared to $854million in FY-2014.
The sub-segments revenue in the current quarter increased 9.7 percent YoY to $1,581 million from $1,441 million. Operating income for the sub-segment was flat YoY to $164 million from $163 million.
For Q4-2014, Disney says that growth in advertising and affiliate revenue was offset by higher programming costs, lower operating income from program sales, an equity loss from Hulu and higher marketing costs for the fall season launch. The increase in advertising revenue reflected higher units sold, including the benefit of the extra week of operations, and higher rates. Affiliate revenue growth was due to contractual rate increases and new contractual provisions. Higher programming costs reflected the impact of an additional week of operations. Lower operating income from program sales was driven by an increase in cost amortization and lower sales. Program sales reflected decreases for My Wife and Kids and America’s Funniest Home Videos, partially offset by the sale of How to Get Away with Murderin the current quarter. The equity loss from Hulu was due to higher content and marketing costs.
Parks & Resorts
Parks and Resorts segment revenue in the current year increased 7 percent to $16,162 million as compared to the $15,099 in FY-2014. Segment Operating income increased 13.8 percent in the current year to $3,301 million as compared to $2,663 million in FY-2014.
The segments revenue in the current quarter increased 10.1 percent YoY to $4,361 million from $3,960 million. Operating income for the segment increased 7.4 percent YoY to $738 million from $687million.
Growth at Parks and Resorts was driven by Disney’s domestic operations due to higher average guest spending, attendance and occupancy, partially offset by increased costs driven by inflation and volumes. Results at Disney’s international parks and resorts operations reflected lower attendance and occupancy at Hong Kong Disneyland Resort and higher pre-opening expenses at Shanghai Disney Resort.
Studio Entertainment
Studio Entertainment segment revenue in the current year increased 1.2 percent to $7,366 million as compared to the $7,278 in FY-2014. Segment Operating income increased 27.4 percent in the current year to $1,973million as compared to $1,549 million in FY-2014.
The segments revenue in the current quarter was flat (increased 0.3 percent) YoY to $1,783 million from $1,778 million. Operating income for the segment more than doubled (2.09 times) YoY to $530 million from $254 million.
At Studio Entertainment, operating income growth was due to a higher revenue share with the Consumer Products segment reflecting the success of Frozen merchandise, an increase in television distribution revenue and higher domestic theatrical results. This growth was partially offset by a decline in home entertainment units sold reflecting the success of Frozen in the prior year.
For Q4-2015, Disney says that Operating income growth was due to increased TV/SVOD distribution results, lower film cost impairments, improved theatrical results and a higher revenue share with the Consumer Products segment. These increases were partially offset by lower home entertainment results.
The increase in TV/SVOD distribution was driven by a lower average production cost amortization rate, the timing of title availabilities in international pay and domestic free television markets as well as SVOD revenue growth internationally. Lower production cost amortization reflected a higher sales mix of catalogue titles in the current quarter.
Operating income growth in theatrical distribution was driven by the performance of Inside Out and
Ant-Man in the current quarter compared to Guardians of the Galaxy, Maleficent and no Pixar title in the prior-year quarter. Theatrical distribution revenues were lower in the current quarter as the prior-year quarter also included Planes: Fire and Rescue and The Hundred-Foot Journey whereas the current year included no Disney feature animation or DreamWorks titles in release. Increased revenue share was due to the performance of Frozen merchandise in the current quarter.
The decrease in home entertainment was due to lower net effective pricing and unit sales reflecting
the prior-year quarter performance of Frozen internationally and Marvel’s Captain America: The Winter Soldier worldwide, partially offset by Marvel’s Avengers: Age of Ultron and Cinderella in the current quarter. These decreases were partially offset by lower per unit costs as well as decreased marketing spending in the current quarter.
Consumer Products
Consumer Products segment revenue in the current year increased 12.9 percent to $4,499 million as compared to the $3,985 in FY-2014. Segment Operating income increased 29.2 percent in the current year to $1,752 million as compared to $1,356 million in FY-2014.
The segments revenue in the current quarter increased 11.5 percent YoY to $1,195 million from $1,072 million. Operating income for the segment increased 9.8 percent YoY to $416 million from $379 million.
Consumer Products operating income growth was due to higher merchandise licensing revenue reflecting the strength of Frozen, Avengersand Star Wars Classic merchandise.
Interactive
Interactive segment revenue in the current year reduced 9.6 percent to $1,174 million as compared to the $1,299 in FY-2014. Segment Operating income increased 13.8 percent in the current year to $132 million as compared to $116 million in FY-2014.
The segments revenue in the current quarter reduced 4.1 percent YoY to $347 million from $362 million. Operating income for the segment increased 72.2 percent YoY to $31 million from $18 million.
Interactive growth was driven by the ongoing success of the Tsum Tsum mobile game and lower product development and marketing costs, primarily at Disney’s mobile businesses, partially offset by lower operating income from Disney Infinity console games.