Analysts Doubt ABC on Outlook

When it comes to Walt Disney Co.’s troubled ABC network, Wall Street is still seeing red.

Some analysts are challenging Disney’s claim that ABC will soon turn a profit. On Thursday, one predicted that the network would bleed hundreds of millions of dollars.

“We believe Disney is likely to come in $200 million to $250 million short of its stated goal to bring ABC to break-even in fiscal 2005,” media analyst Michael Gallant of CIBC World Markets wrote in a report.

An ABC spokeswoman declined to comment.

ABC’s prime-time ratings have been hit especially hard since January, when rival Fox Broadcasting Co. launched a new season of “American Idol,” siphoning viewers from ABC comedies Tuesday and Wednesday nights.

The network’s falling ratings -- and projections of continuing economic problems -- come at a sensitive time for Disney Chief Executive Michael Eisner.

Eisner has promised Disney shareholders a 30% increase in earnings per share this year, along with double-digit growth through 2007. This week, at an investors conference in Palm Beach, Fla., Disney President Robert Iger reiterated that ABC was likely to turn a profit next year. Iger said that turning around the network was a priority, adding that “my reputation in this case is on the line.”

But ABC’s ratings for the television season that ends in May will probably be about 9% below the level promised to advertisers by network executives, analyst Gallant said in his report.

To bridge that gap, ABC will be forced to provide free spots to current advertisers for the second half of the season, Gallant said. That advertising time, he noted, would have been worth about $110 million.

The problems will spill into next season, he predicted, because advertisers will be unwilling to pay rates high enough to catapult the network into profitability.

Other analysts share Gallant’s view.

“I never bought their ’05 break-even target in the first place,” said Tom Wolzien, a media analyst with investment firm Sanford C. Bernstein & Co. “It will be at least a year later.”

Wolzien did credit ABC with successfully trimming costs. The network saved $76 million this year on its Sunday stalwart “The Practice” after creator David E. Kelley fired most of the high-priced actors. The show is scheduled to end its eight-season run in May.

“They’ve cut, cut, cut expenses, and now they need to find some shows that work,” Wolzien said.

W. Timothy Wallace, managing director of UBS Investment Research, said his firm estimated that the network, at best, would break even next year, citing its performance during the February sweeps.

“Networks are very hard things to turn around,” Wallace said.

Times staff writer Richard Verrier contributed to this report.