Profit & Loss: Media results weak, but some optimistic about Q2

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Media companies were still reporting weak results for the first quarter, even as some saw signs of an upturn in ad spending on the horizon.

Despite problems with its ABC network, Walt Disney Co. moved into the black in its second fiscal quarter ended March 31, posting $259 million net earnings vs. a loss in 2001. But revenue dropped 2% to $5.9 billion due to continued travel-related weakness in its theme parks and weak ad sales at ABC. Broadcasting revenue fell 9% to $2.2 billion. Management cited ABC's continued problem of issuing make-goods after failing to deliver the audience promised to advertisers, leaving less inventory to sell. But executives said the ad market seems poised for a small turnaround; executives focused especially on a significant upturn in scatter pricing, or time sold during the season.

big loss

Rival Viacom saw first-quarter revenue dip 1.4% to $5.7 billion. It posted a net loss of $1.1 billion after a $1.5 billion write-down of goodwill related to its Blockbuster division. Without the goodwill charge, Viacom showed income of $367.4 million. A year ago, it reported a net loss of $7.3 million.

Viacom's broadcast TV business-networks (CBS, UPN), local, syndication and production-saw revenue fall 9%. Cable (MTV Networks, BET, Showtime) jumped 5%; radio and outdoor advertising dipped 4%; entertainment, including Paramount Pictures, rose 7%.

The broadcast TV business generated EBITDA-earnings before interest, taxes, depreciation, amortization-of $252.2 million on revenue of $1.9 billion. Cable and radio/outdoor are more profitable: Cable had EBITDA of $403.3 million on revenue of $1 billion, while radio/outdoor had EBITDA of $274 million on revenue of $798.9 million.

In an analysts' conference call, Viacom executives said they were bullish, largely on the promise that the ad market is on a rebound that will propel a strong second quarter with ad revenue above year-ago levels. The company reaffirmed guidance for double-digit EBITDA and earnings-per-share growth for the full year.

"The good news is the bad appears to be behind us," said Viacom Chairman-CEO Sumner Redstone.

Vivendi Universal-soon to be parent of USA Networks-reported operating income rose 27% to $378.6 million and revenue grew 21% to $6.2 billion.

Silence on USA

Executives wouldn't comment on USA's first-quarter performance, noting it won't become part of Vivendi's balance sheet until the acquisition closes in the second quarter. But Chairman-CEO Jean-Marie Messier said, regardless of talk of recovery, his company has assumed a worst-case advertising scenario.

"Our views on the USA business have always been pessimistic on the takeoff of advertising revenue and the advertising recovery in the U.S., so we do not anticipate a recovery of advertising before Q4 '02," he said.

contributing: cara b. dipasquale, wayne friedman, david goetzl

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