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In the current quarter, BAMTech’s operating loss is reported in Cable Networks as a result of our
acquisition of a controlling interest in the fourth quarter of fiscal 2017. In the prior-year quarter, the
Company’s share of BAMTech results was reported in equity in the income of investees. The loss at
BAMTech reflects higher content and marketing costs and ongoing investments in their technology
platform including costs associated with ESPN+, which was launched in April 2018.
The decline at Freeform was primarily due to lower advertising revenue and higher marketing costs,
partially offset by lower programming costs. The decrease in advertising revenue was due to lower
impressions from a decline in average viewership.
The increase at ESPN was due to affiliate revenue growth and the comparison to severance and
contract termination costs incurred in the prior-year quarter, partially offset by higher programming costs
and a decrease in advertising revenue. Affiliate revenue growth reflected contractual rate increases,
partially offset by a decline in subscribers. The programming cost increase was primarily due to a
contractual rate increase for NBA programming. Lower advertising revenue was due to a decrease in
impressions from lower average viewership, partially offset by higher rates. Advertising revenue was
adversely impacted by one less NBA final game.
Broadcasting
Broadcasting revenues for the quarter increased 11% to $2.0 billion and operating income increased
43% to $361 million. The increase in operating income was due to higher program sales, affiliate revenue
growth and increased network advertising revenue, partially offset by higher programming costs.
The increase in program sales was driven by higher sales of Designated Survivor, How to Get Away
with Murder and Grey’s Anatomy, partially offset by lower sales of Quantico. Additionally, the current
quarter included the sale of Luke Cage compared to the sale of The Defenders in the prior-year quarter.
Affiliate revenue growth was due to contractual rate increases. The increase in network advertising
revenue was due to higher rates, partially offset by lower average viewership. The programming costs
increase was driven by higher cost primetime programming, including the impact of American Idol and
Roseanne in the current quarter.
Equity in the Income of Investees
Equity in the income of investees decreased from $127 million in the prior-year quarter to $78
million in the current quarter due to higher losses from Hulu and lower income from A+E Television
Networks (A+E). These decreases were partially offset by the absence of a loss from BAMTech, which is
now consolidated and reported in Cable Networks. The decrease at Hulu was driven by higher
programming and labor costs, partially offset by growth in subscription and advertising revenue. The
decrease at A+E was due to lower advertising revenue and higher programming costs, partially offset by
higher program sales.
Parks and Resorts
Parks and Resorts revenues for the quarter increased 6% to $5.2 billion and segment operating
income increased 15% to $1.3 billion. Operating income growth for the quarter was due to increases
across key operations. Results include an unfavorable impact due to the timing of the Easter holiday
relative to our fiscal periods. One week of the Easter holiday fell in the third quarter of the current year
whereas both holiday weeks fell in the third quarter of the prior year.
Higher operating income at our domestic parks and resorts was due to increased guest spending,
partially offset by increased costs. Guest spending growth was due to increases in average ticket prices,
food, beverage and merchandise spending and average daily hotel room rates. The increase in costs was
due to labor and other cost inflation, partially offset by lower marketing costs. At our cruise line, growth