Disney may be ready to collect cheese
Suggesting that the Mouse House owns the right brands to cut through the content clutter, Disney CFO Thomas Staggs told an investor conference Wednesday that “Desperate Housewives,” “Lost” and “The Chronicles of Narnia” would make mucho moolah in the coming years.
He was speaking Wednesday morning at a confab organized by Atlantic Equities, where he was interviewed by analyst Hamilton Faber.
Faber set the upbeat tone of the hourlong Q&A by suggesting that his firm had a 12-month price target of $30 on the Disney stock, which he termed “very compelling at current levels.” He also singled out ESPN as giving the company its “best earnings visibility.”
Disney closed Wednesday at $25.20; it traded at $28.50 a year ago. The company reports fiscal first quarter earnings on Feb. 6.
Putting the accent on content, Staggs reckoned that “Lost” and “Housewives” — which are hit TV properties owned by the company — would account for some $1 billion in operating profits over the next five years.
He was likely referring to all forms of backend syndication, since domestic rerun sales to local TV stations of those two dramas, unlike sitcom hits, are likely to be fairly modest. (Another Disney-owned hit, “Grey’s Anatomy,” is likely to be a bigger winner in the rerun sweepstakes.)
New platforms, however, seem to be where the company has shifted its focus. A deal for “Lost” and “Housewives” on Apple iPods, Staggs told the assembled, had “energized” the company’s thinking, though the revenue streams from these newfangled outlets are still just a trickle.
Expect to see more such deals, with other outlets upcoming, he added. The iPod deal he termed an important catalyst but by no means exclusive. Supplementary content created around hit shows for these new outlets is another revenue opportunity, he said.
Staggs also emphasized that the ABC network now had nice momentum after several tough years, and he expected ratings to continue to shine and the ad market to remain fairly buoyant.
“We made a half a billion dollars more this year in the upfront TV ad market than last year,” he pointed out.
Other strong suits, said Staggs, included Disney Channel and “The Chronicles of Narnia: The Lion, the Witch and the Wardrobe,” which he said was a smash that “looks to be the beginning of a franchise for us.”
Asked by an attendee if Disney would try to renegotiate the financial arrangement with partner-producer Walden Media on the movie, Staggs intimated that the 50-50 split on revs from the movie (plus a modest distribution fee) would probably remain the deal throughout the life of the franchise. “We are pleased with that,” he said.
Despite reports to the contrary, Staggs said there were no formal announcements yet as to what “Narnia” sequel there might be; “exactly what order, or what’s next” remains to be seen, he said.
As to the stock-market performance of the company, Staggs suggested that the second half of the year should bring good news, pointing out that there is “plenty of capital for growth and expansion” while still giving back to shareholders. Among the reasons for optimism:
- Capital expenditures on theme parks (particularly Hong Kong) will have decreased; the Mouse spent some $11 billion on its parks from 1997 to 2003, but such outlays are no longer necessary.
- The downward drag of the Miramax label will have been completely lifted.
- Some $100 million in revenues to ESPN from affiliate contracts will be recognized in the second half.
- Big-budget film bets like “Pirates of the Caribbean: Dead Man’s Chest,” “Cars” and “Shaggy Dog” should start to hit.
Still weighing on the company are the ongoing negotiations with animation partner Pixar, which Staggs declined to discuss, and the more general concerns about a battle between competing high-definition standards (Disney backs Blu-ray) and the apparent leveling off of the DVD market.
The chief financial officer, who is also senior exec VP at the company, also told analysts that former Sen. George Mitchell has agreed to stay on as the company’s interim chairman through December to help in the transition period to a new chairmanship.