Cable TV a bright spot on earnings reports
Movies, once considered the ultimate rocket fuel for media congloms, have lately left them earthbound.
Last week’s earnings reports by Viacom, Time Warner, Disney and News Corp. vividly illustrated the point. If there was any bright spot in these dark times, it wasn’t the bigscreen; it’s cable TV.
It was a mixed bag of results, ranging from decent to terrible. In no case, however, was film the star of the show. Top execs touted the multiplatform profits of “The Closer,” ESPN or various international and Internet ventures, while tacitly admitting their studios are stuck inneutral.
The major studios are still focused on mobilizing a Batman- or Spider-Man-sized franchise — the better to plug into an array of revenue-producing corporate arms — but the movie biz has gotten increasingly expensive while theatrical admissions and DVD sales have stayed flat or drifted slightly down in recent years.
Even the model cooked up in this decade of off-balance-sheet financing hasn’t borne a lot of fruit: Serving simply as a distributor may lower certain risks, but it also reduces rewards.
Viacom, home to a slew of pics fostered by DreamWorks and Marvel, said its film unit’s operating income totaled just $4 million in the first nine months of 2008. News Corp.’s quarterly operating net slumped 31% due to “Meet Dave” and other non-starters.
Disney, which has slimmed down and fine-tuned its slate to boost its family appeal, nevertheless posted a 42% profit decline and a 5% drop in revenue.
Of course, the economic backdrop is overshadowing all results. The stock markets, after recovering from the lows of late October, had their worst two-day performance in 21 years on Nov. 5 and Nov. 6, dragging media shares down with them. No single line item on a media company balance sheet can trump that.
As Rupert Murdoch said, “All media companies are being tested, and the year ahead will be difficult.” Indeed, several of the congloms have lowered their earnings outlook as the picture gets gloomier.
What’s striking, though, is the response to the wobbly movie studio results. Warner Bros. recently cut its release output 20% and Time Warner pulled the plug on Warner Independent, Picturehouse and New Line as a standalone distrib. Paramount, even with the soon-ending DreamWorks deal, wound up with just 10 releases this year and folded its Vantage wing into the main studio.
Fox, for its part, is standing pat. It will have 20 pics in 2008, tying Sony and Universal for the most in town. “We feel good about the structure and the number of movies and the management we have in place,” says chief operating officer Peter Chernin.
Hoping the rough patch is just cyclical, News Corp. is looking ahead to “Night at the Museum 2” and the “X-Men” Wolverine spinoff to lift its fortunes.
“This time next year, we’re going to see a considerably smaller number of movies, and we’ll get a bigger share of the box office,” Murdoch says.
A more unnerving outlook came from Disney’s Bob Iger, whose comments on the big picture certainly have a bearing on ticketbuyers’ willingness to go to the movies.
“Consumer confidence is the lowest we’ve seen in over three decades. Even the best product out there is feeling the effect.”