ABC POISED TO REAP BENEFITS OF SCATTER MARKET

Disney Network Has Ad Inventory Available in Top Shows for Fall

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NEW YORK (AdAge.com) -- Robert Iger, Walt Disney Co.'s CEO-elect, said the company's ABC network is in a strong position to take advantage of fourth-quarter ad sales in what is known as the scatter market.
Disney reported third-quarter net income increased 41%.
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Of the network's pricing strategy during the "upfront," the springtime sales period when networks sell much of their programming ad inventory, Mr. Iger said: “They read the marketplace very carefully and I think in the end accurately in terms of just how deep it would be.”

Strategy proved correct
ABC increased ad prices for advertisers by only mid-single digits during the upfront in expectation of a pullback in spending by advertisers on broadcast TV -- which proved correct. Many media buyers had expected higher prices increases from ABC given the performance of its schedule, which included a number of hit shows such as Desperate Housewives.

ABC added some $600 million to its upfront take, bringing in $2.1 billion in advertiser commitments, up from $1.6 billion the previous year, when the network was mired in fourth place in the ratings behind rivals CBS, Fox and NBC.

Mr. Iger, speaking during a call with analysts Aug. 9 to discuss the company's third-quarter results, said ABC is well-positioned to take advantage of a strong scatter market because much of the upfront inventory sold was in shows that were anticipated to have lower ratings than the established hits. The scatter market is when networks sell remaining ad space at a premium to marketers who need to run ads as the need arises.

More inventory for top shows
“While they [ABC] sold approximately 80% of their schedule, their mix of inventory in scatter is excellent,” Mr. Iger said. “In fact it’s actually stronger than it was last year. So the inventory that they have left to sell in programs like Desperate Housewives and Lost and Grey’s Anatomy is proportionately greater than the inventory that they have in some of the new programs.”

Overall, Disney reported third-quarter net income rose 41%, from $604 million to $851 million compared with the third quarter last year. For the nine months, net income grew 24% to $2.272 billion. Media networks revenue grew 16%, with operating income at the cable networks segment up some 38% to $729 million, compared with $529 million in the prior year quarter. The growth was largely attributable to sports network ESPN, which increased affiliate revenues due. In the broadcasting segment, operating income increased to $269 million, up from $144 million in the prior-year quarter, because of ABC’s better ratings, reduced programming costs and higher ad rates.

The bad news
The bad news for Disney was its movie business and the decline in home video sales relative to box office results. Studio revenues were down 15% to $1.5 billion. The company is releasing DVD versions of Desperate Housewives and Lost in early and late September.

For outgoing CEO Michael Eisner, the analyst call was his last in his current position. When asked what he would do following his departure from the company, Mr. Eisner said, “Even though the company made a movie about fly-fishing, I find that quite boring. I can only do 13 holes of golf before I get bored so I suspect I’ll be doing something, but what that is, I have no idea.”

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