strategic-management

6 MERNOUSH BANTON
Entertainment Services, A&E Television Networks, E! Entertainment, ESPN, History
Channel, The Biography Channel, Hyperion Books, and Disney Mobile.
The increase in revenue in this segment was primarily due to growth from cable and
satellite operators, which are generally derived from fees charged on a per subscriber basis,
contractual rate increases, and higher adverting rates at ESPN. The increase in broadcasting
revenue was due to growth at the ABC Television Network and increased sales of Touchstone
Television series as well as an increase in prime-time advertising revenues. Increase in sales
from Touchstone Television series was as a result of higher international syndication and DVD
sales of hit dramas such as Lost, Grey’s Anatomy, and Desperate Housewives, as well as higher
third-party license fees led by Scrubs, which completed its fifth season of network television.
Two major TV networks of Disney (ABC and ESPN) recently struck a deal with
cable operator Cox Communication whereby these companies now offer hit shows and
football games on demand. Although advertising in the network is a source of additional
revenue for the broadcasters, it requires selectivity for charging for each episode. Videoon-demand
is a major industry and is expected to grow to $3.9 billion by 2010.
Disney recently unveiled Disney Xtreme Digital, a networking site aimed at children
younger than 14 years of age. This service will be competing against MySpace (owned by
News Corporation). Disney has reported an increase in fiscal 2009 second-quarter net
income mostly as a result of strong gains at cable network ESPN. Higher advertising revenues
are reflected due to NASCAR programming at ESPN, an increase at ABC Family
primarily due to higher rates, higher other revenues by DVD sales primarily from High
School Musical, and a favorable settlement of a claim with an international distributor.
Exhibit 6 provides specific segment information for the Media Networks division.
Disney’s domestic broadcast television stations are listed in Exhibit 7. Disney’s international
media network operations are described in Exhibit 8. In prime time, higher advertising rates
and sold inventory were partially offset by lower rating from some of the problems. Increased
sales of ABC Studios productions reflected higher international and DVD sales of hit drams
such as Desperate Housewives, Grey’s Anatomy, and Ugly Betty.
Parks and Resorts
Disney owns and operates Walt Disney World Resort & Cruise Lines in Florida,
Disneyland Resort in California, ESPN Zone facilities in many states, 17 hotels at the Walt
Disney World Resort, Disney’s Fort Wilderness Camping and Recreation, Downtown
Disney, Disney’s Wide World of Sports, Disney Cruise Line, 7 Disney Vacation Club
Resorts, Adventures by Disney, and 5 resort locations with 11 theme parks on three continents.
With theme parks, Disney has 51 percent ownership in Disneyland Resort Paris,
EXHIBIT 6 Media Network Segment: Revenue and Operating Income
Change
2008 2007
vs. vs.
(in millions) 2008 2007 2006 2007 2006
Revenues:
Cable Networks $ 10,041 $ 9,167 $ 8,159 10% 12%
Broadcasting 6,075 5,937 6,027 2% (1)%
$ 16,116 $ 15,104 $ 14,186 7% 6%
Segment operating income:
Cable Networks $ 4,100 $ 3,577 $ 3,001 15% 19%
Broadcasting 655 698 480 (6)% 45%
Source: Walt Disney Company, Annual Report (2008).
$ 4,755 $ 4,275 $ 3,481 11% 23%