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news and views on broadcast and professional video/audio sectors, worldwide

w/e February 21, 2010 SCRI International, Inc © 1984 - 2009


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Disney Pleased with Q1 Results

The Walt Disney Company breported earnings for its first fiscal quarter ended January 2, 2010. Diluted earnings per share (EPS) for the quarter were $0.44 compared to $0.45 in the prior-year quarter. EPS for the current and prior-year quarter include the items discussed in the following paragraph. Excluding these items, EPS for the quarter increased 15% to $0.47 compared to $0.41 in the prior-year quarter.

“We are pleased with our first quarter results and are excited about our creative pipeline, from upcoming movies like Alice in Wonderland and Toy Story 3 to new attractions at our Parks and Resorts,” said Robert A. Iger, President and CEO, The Walt Disney Company. “Our unique ability to deliver outstanding experiences to consumers across platforms, markets and businesses gives us a strong competitive advantage and positions us well for long-term growth.”

Operating income at Cable Networks increased $27 million to $544 million for the quarter driven by increases at the worldwide Disney Channels and ESPN, partially offset by a decrease in income from equity investments. The increase at the worldwide Disney Channels was driven by higher affiliate revenue due to subscriber growth internationally and higher contractual rates domestically. The increase at ESPN was due to higher affiliate and advertising revenue, partially offset by higher programming and production costs. The increase in affiliate revenue was primarily due to higher contractual rates and subscriber growth, including growth from the launch of a new network in the United Kingdom while higher advertising revenue was due to an increase in sold inventory, partially offset by lower rates. Higher programming and production costs reflected costs for soccer programming rights for the new network in the United Kingdom and increased contractual costs for college football and NFL programming. Decreased equity income was driven by increased programming and restructuring costs, partially offset by higher advertising and affiliate revenue at A&E Television Networks (AETN) which now includes the Lifetime networks. Restructuring charges at AETN were primarily for severance costs as a result of the combination of AETN and Lifetime in the fourth quarter of fiscal 2009.

Operating income at Broadcasting increased $42 million to $180 million for the quarter primarily due to the absence of a bad debt charge in connection with the bankruptcy of a syndication customer in the prior-year quarter and higher revenues from ABC Studios productions driven by increased third party network license fees and international sales of Criminal Minds. These increases were partially offset by decreases at the ABC Television Network and owned television stations. At the ABC Television Network, results reflected lower primetime ratings and advertising rates, partially offset by a shift from political news coverage in primetime in the prior-year quarter to entertainment programming in the current quarter. At the owned television stations, results reflected lower advertising revenue due to higher political advertising sales in the prior-year quarter.

Studio Entertainment revenues for the quarter were essentially flat at $1.9 billion and segment operating income increased 30% to $243 million. Higher operating income was primarily due to an increase in domestic home entertainment, partially offset by decreases in domestic theatrical distribution and music distribution.

Higher domestic home entertainment results were primarily due to lower distribution costs and marketing expenses, driven by cost reduction initiatives, and lower production cost amortization and participation expense. The decrease in amortization and participation expense reflected the strong performance of Up and The Proposal in the current quarter compared to WALL-E and The Chronicles of Narnia: Prince Caspian, which had high participation costs, in the prior-year quarter.

The decrease in domestic theatrical distribution was driven by higher film cost write-downs in the current quarter. Lower results in music distribution were primarily due to lower album sales reflecting the strong performance of High School Musical 3 in the prior-year quarter.

Discovery Reports Strong 2009

Discovery Communications, Inc. reported financial results for the full year and fourth quarter ended December 31, 2009.

David Zaslav, Discovery's President and Chief Executive Officer, said, "The strength of Discovery's performance throughout 2009 reflected the quality of our distribution platform and content assets and our focus on delivering real operating leverage. The affiliate fees we generate across the globe provided consistent resiliency throughout this past year, while the ratings growth across our networks and the value of our unique content enabled advertising to grow despite the weak environment. Our revenue growth, combined with thoughtful cost management, increased our operating efficiency, translating into double-digit Adjusted OIBDA (1) and free cash flow growth. As we look to 2010, we remain focused on further monetizing our ratings momentum in an improving advertising environment, continuing to strengthen our distribution platforms and relationships and, most importantly, delivering high quality content to our viewers."

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Technicolor (ex Thomson) Reports a Net Loss for 2009

French media-technology group Technicolor SA posted a full-year net loss, as the company formerly known as Thomson SA emerges from bankruptcy protection and continues a major restructuring effort—including a new rebranding project.

The Paris-based company said revenue slumped 14% to €3.53 billion ($4.86 billion) in 2009, as sales of its television set-top boxes fell. The full-year net loss totaled €342 million, largely because of restructuring charges, and compares with a net loss of €1.93 billion for 2008.

In the fourth quarter, revenue declined 27% from a year earlier to €926 million.

Technicolor is still reeling from a decision taken a decade ago to switch from making electronic goods, including television sets, to focus on being a one-stop shop for content companies looking to edit and distribute their movies and TV shows. In the process it undertook a series of costly acquisitions, piling on huge debts that it is now trying to offload. So far Technicolor's new strategy—under which Technicolor offers a range of services, including making DVDs and producing the special effects for the Harry Potter movies—has yet to pay off.

On Wednesday, a Paris court lifted the company's protection from its creditors after the court approved a debt-restructuring plan. In November Technicolor had filed for the French equivalent of U.S. Chapter 11 bankruptcy protection, as the company sought to cut its debt to a more manageable size.

"We have to bury the past of the Thomson name," Technicolor Chief Executive Frederic Rose said during an interview, adding that the company also would focus on selling noncore businesses. "It's time for us to move on."

Mr. Rose said revenue is likely to increase in the second half of 2010 as the company receives payment from its clients for a series of contracts it signed last year. Technicolor recently signed an agreement with entertainment company Warner Bros., a unit of Time Warner Inc., to make and distribute DVDs and Blu-ray discs. Mr. Rose said the company has other deals in the pipeline, including one with a telecommunications company to buy set-top boxes.

In December, Technicolor's creditors approved a debt-reduction plan that aims for the company to reduce its gross debt by 45% to €1.5 billion and pursue a €348 million capital increase. Then in January, shareholders voted to rebrand the company Technicolor and separate the roles of chairman and chief executive. Debt stood at €2.18 billion at the end of 2009.

Mr. Rose also unveiled a new board of directors on Wednesday. Denis Ranque, a former chief executive at aerospace and defense-electronics company Thalés SA, was named as the nonexecutive chairman of the board, Technicolor said in a statement.

Avid Acquires Blue Order

Avid has bought the German media asset management company Blue Order Technologies for an undisclosed fee.

The company said that it would not be revealing terms of the deal but did acknowledge that all Blue Order customers have been notified about the acquisition and that Avid will continue to develop and support current Blue Order products.

A spokesperson said: “This acquisition represents how Avid continues to make investments in areas that enable our customers to do what they do best – which is create the most listened to, most watched, and most loved media in the world.”

The deal was completed in January but was not announced by the US-based editing and effects equipment manufacturer.

Barco Cuts Losses in 2009

Barco announced results for the three- and twelve-month periods ended 31 December, 20091.

Commenting on the results of 2009, Eric Van Zele, President and CEO, said: “In the wake of the economic crisis and the global credit crunch, Barco had no other option but to deal decisively with the new realities of the markets it was serving. Demand for products and systems in the events and out-of-home media markets imploded. So we needed to right-size and clean up our assets and resources deployed in this division. This included taking provisions for all known liabilities and selling-off or writing-off all excess inventories and capitalized research & development expenses. Furthermore impairment of goodwill on acquisitions done in previous years proved necessary and operating expenses had to be cut drastically. This explains why Barco's 2009 focus was on generating the cash needed to guide the company safely through turbulent times and through many costly change processes.”

Looking ahead at 2010 Mr Van Zele suggested that the drastic clean-up and right-sizing actions he took in 2009 would enable Barco to emerge as a much stronger and better company in 2010. He expressed confidence about continued solid growth in the digital cinema and medical imaging markets whilst Barco would also further capitalize on good economic conditions and promising growth prospects in emerging geographical markets. With the introduction of several LED enabled new product platforms Barco further aims at restoring its technical leadership position in the traffic & surveillance markets and plans to finally reduce its large order backlog in simulation, avionics and defense. Combined with continued progress in operational excellence and the introduction of many mid segment offerings, the company is well positioned for growth and a return to healthy levels of profitability (EBIT) in 2010.

Optibase Q4 Revenue Up but Down for the Year

Optibase Ltd. announced financial results for the fourth quarter and year ended December 31, 2009. Total revenues for the fourth quarter ended December 31, 2009 were $3.4 million compared with $3.2 million for the third quarter of 2009 and $3.6 million for the fourth quarter of 2008. Total revenues for the fourth quarter of 2009, includes an amount of $272,000 which relates to real estate income.

Net loss for the fourth quarter ended December 31, 2009, was $1.1 million or $0.07 per basic and fully diluted share, compared with a net loss of $0.7 million or $0.04 per basic and fully diluted share for the third quarter of 2009 and with a net loss of $2.8 million or $0.17 per basic and fully diluted share for the fourth quarter of 2008. Weighted average shares outstanding used in the calculation for the periods were approximately 16.5 million basic and fully diluted for the fourth quarter of 2009, the third quarter of 2009, and for the fourth quarter of 2008.

For the year ended December 31, 2009, revenues totaled $13.4 million, compared with $19.9 million for the year ended December 31, 2008. Total revenues for the year include an amount of $272,000 which relates to real estate income. Net income for the period was $60,000 or $0 per basic and fully diluted share, compared to a net loss of $9.5 million or $0.63 per basic and fully diluted share for the year ended December 31, 2008. Weighted average shares outstanding used in the calculation for the periods were approximately 16.5 million basic and fully diluted and 15.2 million basic and fully diluted respectively.

The yearly results also include $4.8 million of other income from the sale of our holding in Scopus’ shares, net of equity in losses during the period.

Commenting on the quarter, CFO of Optibase, Amir Philips, said, “This last year has been a very challenging year for us. The global economic downturn had placed many challenges for us and the other players in the market. Though the global economy has seen some recovery over the last few months, there is still a great deal of uncertainty. During the last quarter we have actively engaged our real estate activity, purchasing our first asset in Switzerland, the results of which are already showing on our financial statements.”

Vizrt Takeover of Adactus

Vizrt Ltd., a provider of content production tools for the digital media industry, announced that its Board of Directors has approved in principle the purchase of the remaining 71.01% of the issued share capital of privately held Adactus A.S. ("Adactus"). The deal values Adactus at NOK 30 million (approx. USD 5.1 M). Vizrt currently holds 28.99% of the issued share capital of Adactus, with the first investment made in September 2005 as a commitment for joint development projects.

Adactus has developed a multimedia delivery platform based on the newly-evolving ISO standard, MPEG-21, as well as a mobile content gathering and delivery solution.

The proliferation of mobile and other content access devices, such as smart phones, tablet PCs and smart TVs, means that content has to be delivered in conformity with the different (screen)formats and capabilities of each of these devices. Adactus was founded with these requirements in mind, and the company has developed the tools that are needed to serve this fragmented market. The Company's solutions ensure that, for instance, the video you see on your Nokia mobile is optimized for that device, and that people using the iPhone can get that same video, from the same source, in a size and quality that is optimized for their screen.

Significant resources have been spent by content providers on testing various solutions available to meet with this need to deliver content to various mobile terminals each with different specifications. Turner from the US (CNN, Cartoon Network, etc) and Norway's NRK are two of the many companies that have selected Adactus as their video delivery platform.

Another aspect of Adactus's business is their content gathering solution, where journalists (or private individuals) record and gather content on their mobile phone and deliver this to news organizations, enabling many exclusives and breaking news content where otherwise there would be no content.

Bjarne Berg, Vizrt's CEO, stated, "The market for content delivery to mobile terminals is increasing in importance and is fast growing. Fully integrating this capability with Vizrt's other content production and distribution capabilities, allows further strengthens our offering to content delivery houses. They know, as we do, that offering the best viewing experience is critical to growing market share and related revenues."

He continues, "The decision to acquire the rest of Adactus was an easy one. We have worked with the Company for some time, already hold a significant stake and have two serving Board members. As a result, we know Adactus, its capabilities and markets well. Following satisfactory due diligence and Board approval of the take-over, we therefore anticipate a smooth integration with Vizrt's operations."

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2010-2011 Broadcast Pro Video Marketplace Reports

2010-2011 Broadcast Pro Video Marketplace Reports Series is now available. A total of 25 individual product reports as well as a macro industry overview and micro quantitative data analysis reports are available. Contact for more information.

2010-2011 Broadcast Pro Video Marketplace Decliined 4.5% in 2009.

As predicted by SCRI in last years reports, the dire economic conditions impacted the broadcast and professional video industry in 2009 with total dollar revenue derived from end-user purchases (of the twenty five product categories tracked by SCRI) declining by 4.5% to $9.7 billion from $10.1 billion in 2008. Total units purchased in 2009 declined by 1.2%, reflecting a decline in average unit prices in addition to the decline in units purchased.

The outlook for 2010 is somewhat more optimistic with total revenue expected to come in at around $10.5 billion, an overall increase of 4.5% in dollars generated by end-user purchases. Units purchased are expected to increase by 5.9%, again indicative of the expected decline in average unit prices across the board.

Looking ahead to 2011, overall dollars are expected to increase by a healthy 5.9% compared to 2010, to $10.7 billion. Units sold to end-users are expected to increase by 7.1%, again reflecting the trend in recent years to declining average unit prices across the board.

In historical terms, the six year period 2006 - 2011 has seen growth decline compared to the five years preceding. Total dollar revenues increased by an average annual rate of 11.9% between 2001 and 2006; whereas the average annual growth rate from 2006 to 2011 is expected to come in at only around 1.4%. The rate for the eleven year period is at around 7.1%.

Unit volume shows a similar pattern, with average annual growth from 2001 – 2006 at 10.4%, while 2006 – 2011 drops to 2.4%. The ten year average annual growth rate is 7.0%.

The 2010-2011 Broadcast Pro Video Marketplace Reports Series is now available. A total of 25 individual product reports as well as a macro industry overview and micro quantitative data analysis reports are available. Contact for more information.

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