Disney released its earnings this week and it shows that while the company’s entertainment and cable properties are profitable and humming along, its broadcast division continues to be a drag on the company.
The division, which consists of the ABC network and its eight ABC-owned affiliates, reported on Thursday a 7% decline in revenue and an even larger 23% drop in operating income in their first quarter compared to the same period last year.
Disney blamed the poor performance at ABC on lower affiliate revenue due to the ending of Oprah Winfrey’s talk show and a decline in political ad spending in an off year.
That might make sense at one of the other networks, but ABC owns the fewest affiliates among the big three broadcast networks. Thus, the loss of Oprah and the decline in political ads shouldn’t cause the profits to drop as much as they did since they don’t contribute that much to the bottom line when compared to the cable or film operations.
The real problem at ABC is its declining ratings. Last year the network finished last in the advertiser desired 18-49 demo, down 1% overall from the year before, while Fox and CBS saw their viewership rise 2% and 14% respectively in the same demo.
And with lower viewership in the key demo comes lower ad rates, which translate to lower revenues and profits.
The news division hasn’t fared much better, especially after the debacle with “This Week with Christiane Amanpour,” from which ABC is still trying to recover.
Disney should consider selling or spinning off ABC. But the problem is finding a buyer for a network in decline in an industry whose profitability is being eroded by the likes of Hulu, Netflix and YouTube as they continue to grab a larger share of both the networks’ viewers and advertisers.
Until Disney is willing to pull the trigger, like GE did when they sold a majority interest of NBC to Comcast (which means that they don’t have to report NBC’s earnings on the financial statements), it will be stuck with a property that continues to depreciate in value a little more each day. It will continue to be a drag on the company until it has no value at all.