Walt Disney Co Earnings Call Insights: Affiliate Revenue Growth and Hulu Charges
Affiliate Revenue Growth
Benjamin Swinburne – Morgan Stanley: Jay, I wanted to ask you a little bit about the ESPN affiliate growth or able affiliate growth or cable affiliate growth what are you are more comfortable speaking to. You called out the renewals that you’ve got behind you in and the visibility into affiliate revenue growth. So can you talk about what it was in the quarter and then maybe any kind of guidance or expectations for the acceleration level into fiscal Q2 now that you are a month in? Bob, I wanted to ask you brought up to Disney Channel and some of the creative successes there, that’s a pretty big business, that sort of gets lost a bit in the cable segment. But I was wondering if you could talk about how you think about financially exploiting more the products that you’ve got, the shows you’ve got that have done so well in the past year or two into driving earnings because it’s sort of not obvious and there is not huge advertising piece of the business to the rest of us.
Jay Rasulo – SEVP and CFO: Let me start Ben in terms of cable affiliate growth in the quarter, Q1. Consistent with the trends that we’ve been seeing over the past couple of quarters, Q1 adjusted cable affiliate revenue grew high single digits for the quarter and when I say adjusted this adjusts for both the deferrals that I spoke of and for some FX that affect the quarter, I really don’t want to get into looking down the road on affiliate revenues though.
Robert A. Iger – President and CEO: Regarding the Disney Channel as you know Ben we started off with Disney Channel it initially began as a premium service. We grew it and we grew revenue by ultimately turning into a basic service and improving not only the bottom line, but the visibility and the exposure to our brand and to the various intellectual property that we created on that channel. We then relaunched set of a channels to XD and only recently launched Junior. So as we look across the globe we now are sitting on well over 100 of these channels some of which are advertising supported all of which support the brand and the intellectual property and ultimately support our other businesses, particularly consumer products, but also online, Interactive, Parks and Resorts, parts of Consumer Products like publishing, mobile apps those sorts of things. So in effect we’ve created a pretty broad ecosystem of product emanating from these channels and I’d say over time, and it will take some time you’ll see continued increase in revenue from higher subs, higher sub fees, higher advertising and then of course all the other businesses that get ultimately the benefit of this great product. So, when we have suddenly four very popular shows with kids 2 to 5, we’re already starting to see that in Consumer Products, but I think the long-term impact is really significant because, for instance, in the last go around with our distributors we obviously were looking to get Disney Junior penetrated that resulted in relatively modest sub-fee structure. Over time, that sub-fee structure will change dramatically and that will start to generate a lot of revenue. So, I think it’s an extremely valuable business for us. You are right, it doesn’t get that much visibility and yet it is visible to us in almost everything that we do.
Michael Nathanson – Nomura: I have one housekeeping for Jay and then a follow-up to next question. So, Jay, the question is the Hulu charge of $55 million, that’s not shown in the OI line in Broadcasting, so we don’t have to add back $55 million to OI there?
Jay Rasulo – SEVP and CFO: Right. Let me try to clarify that. The $55 million which was a charge that was an executive compensation charge for the Hulu team that was triggered when we bought Providence out of Hulu is reflected in equity income line in the income statement, but is excluded from the segment OI.
Michael Nathanson – Nomura: Then let me just follow-up to Ben’s and, the Q came out and looks like in the 10-Q, its saying that the rate increases you had for cable was at 7% a quarter, so is it safe to assume that now that the new deals are kicking in the March quarter, the 7% growth rate you saw for just pricing should logically go up from there, is that an logical assumption?
Jay Rasulo – SEVP and CFO: We are beginning to recognize in the second fiscal quarter the new rates that are associated with those new deals that we’ve negotiated. You are right about that at ESPN and the rates of course are differential across all of the ESPN channels that are out there. So, yes I think we can expect to see an increase. I don’t want to talk about how much.
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