The Walt Disney Company Reports First Quarter Earnings For Fiscal 2015 (Page 3 of 14) in pdf

Cable Networks

Operating income at Cable Networks decreased 2% to $1.3 billion for the quarter due to a decrease at

ESPN, partially offset by increases at the worldwide Disney Channels and ABC Family.

The decrease at ESPN was due to higher programming and production costs and, to a lesser extent,

higher marketing, general and administrative and technical costs and lower advertising revenue. These

decreases were partially offset by affiliate fee contractual rate increases, a reduction in revenue deferrals

as a result of changes in contractual provisions related to annual programming commitments and an

increase in subscribers, taking into account the new SEC Network. Programming and production cost

increases were due to a contractual rate increase for NFL programming and rights costs for the SEC

Network. ESPN advertising revenue decreased due to lower ratings for certain of our programs, partially

offset by higher rates.

The increase at the worldwide Disney Channels was due to higher affiliate rates for the domestic

channels and higher international advertising revenues, partially offset by higher programming costs.

International advertising revenues were driven by our new channel in Germany, which was launched in

January 2014. Increased programming costs were driven by higher pilot write-offs and costs for the new

channel in Germany. The increase at ABC Family was due to higher affiliate revenue due to higher rates

and increased advertising revenue reflecting higher units sold.

Broadcasting

Operating income at Broadcasting increased 35% to $240 million for the quarter due to an increase in

affiliate fees and higher program sales. These increases were partially offset by lower advertising

revenue. The increase in affiliate revenues was due to contractual rate increases and new contractual

provisions. Program sales growth included higher sales of Criminal Minds, Scandal and Once Upon A

Time. Lower advertising revenue was due to fewer units sold at the ABC Television Network, partially

offset by an increase at the owned television stations due to higher political advertising and an increase

from higher primetime rates.

Parks and Resorts

Parks and Resorts revenues for the quarter increased 9% to $3.9 billion and segment operating

income increased 20% to $805 million. Operating income growth for the quarter was driven by an

increase at our domestic operations, partially offset by a decrease at our international operations.

Higher operating income at our domestic operations reflected both higher volumes and guest

spending growth at our parks and resorts and, to a lesser extent, at our cruise business, partially offset by

higher costs. Guest spending growth at our parks and resorts reflected higher average ticket prices and

increased merchandise, food and beverage spending. The volume increase at our cruise business reflected

higher passenger cruise ship days due to the impact of the Disney Magic being in dry-dock for a portion of

the prior-year quarter. Increased costs were driven by labor and other cost inflation, higher pension and

postretirement medical costs and increased depreciation driven by new attractions.

The decrease at our international operations was driven by higher Shanghai Disney Resort pre-

opening expenses, the impact of a weaker Japanese yen on Tokyo Disney Resort royalties and higher costs

at Hong Kong Disneyland Resort, partially offset by an increase at Disneyland Paris. The increase at

Disneyland Paris was due to higher guest spending, attendance and occupied room nights, partially offset

by higher costs driven by higher volumes, new guest offerings and marketing costs. The increase in guest

spending was driven by higher average ticket prices.

The Walt Disney Company Reports First Quarter Earnings For Fiscal 2015 Page 3