Revenue dips 7% to $8.1 billion in 2nd quarter
Walt Disney Co. profits plunged 46% last quarter to $613 million because of a steep slide in studio earnings and the shaky economy taking its toll on the Mouse’s parks biz and retail sales.The television units were a brighter spot in Disney’s fiscal second-quarter earnings report, which saw the company’s overall revenue dip 7% to $8.1 billion. Profits at the film studio sank a whopping 97% to $13 million last quarter. Homevideo sales were soft, a problem that’s plaguing most studios, but theatrical releases also underperformed in the midst of an otherwise booming box office. Disney CEO Bob Iger was candid about the studio’s performance in a conference call on Tuesday. “In this case, it’s not the marketplace, it’s our slate,” Iger said. “It’s about choice of films and execution of films that have been chosen for production. And we’ve had a rough year.” Studio revenues fell 21% to $1.4 billion. In homevideo, titles including “High School Musical 3: Senior Year,” “Beverly Hills Chihuahua” and “Bolt” didn’t match up to “Enchanted,” “Game Plan” and “No Country for Old Men” a year earlier. Theatrically, “Bedtime Stories,” “Race to Witch Mountain” and “Confessions of a Shopaholic” performed well below expectations. Execs anticipate the studio will face tough comparisons in the current third quarter as well. Iger said the studio is “addressing costs at virtually every level.” Disney and most other studios are already releasing fewer films. Iger said the Mouse will continue to evaluate the studio’s output, its production and marketing costs. He’s hopeful for the upcoming slate, led by “Up,” which is the first animated pic ever to open the Cannes Film Festival. Iger also said the company is exploring an online Disney-branded subscription service for its movies — but one that would be windowed in a way that would make it compatible with a pay-TV model. Disney’s deal with Starz runs through 2012. “Pay deals have been a very good source of revenue for us … but we realize there are opportunities to monetize beyond those,” he said. Disney’s Media Networks biz, including broadcaster ABC and cable’s ESPN, the Disney Channel and ABC Family, turned in solid numbers given the rocky advertising climate. Profits dipped 4% to $1.3 billion. Revenues nosed up 2% to $3.6 billion. Higher affiliate fees at ESPN helped push cable income up 5% to $1.1 billion. But broadcast profits plunged 38% to $162 million due to lower advertising sales at the stations and higher programming costs at the network. At parks and resorts, revenues for the quarter eased 12% to $2.4 billion, and income dropped 50% to $171 million. Heavy discounts and promotions kept attendance at the domestic parks fairly steady year-over-year but ate into margins. Iger and chief financial officer Tom Staggs echoed some other media execs this earnings season in observing that the advertising market may have stabilized. It’s not good, they said, but it’s not getting any worse. Ditto for travel and tourism and, generally speaking, homevideo sales, although Iger noted those are title-specific. “The trends seem to be continuing and not worsening. (Although) we’re not seeing improvements yet,” he said. He still sees retail as one sector with little visibility. “I think the retail sector in general could be facing some difficult times. I think it would be premature to say we see stability now,” he said. Disney shares rose 1.27% Tuesday to close at $23.15.
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