Conglom conjures 21% profit gain

The Walt Disney Co. wrapped up a record fiscal 2011 last month, with profits rising 21% to $4.8 billion on revenue of $40.1 billion, up 7%.

Strong growth at ESPN, Disney Channel, ABC Family, as well as increases in theme park attendance and in sales of “Cars 2″ and Marvel merchandise, were largely responsible for the improved results.

For the fourth quarter that ended Oct. 1, Disney reported a 30% boost in profits of $1 billion as revenue rose 7% to $10.4 billion. Most of the gains came from the Mouse House’s cable and broadcast biz, which saw revenues rise 9% to $4.8 billion while profits were up 20% to $1.5 billion during the frame.

For the year, the TV networks generated a whopping $18.7 billion in revenue, up 9%, boosting profits 20% to $6.1 billion. Cable channels hauled in the lion’s share, with $5.2 billion in revenue, largely on increased advertising and affiliate earnings at ESPN, although ABC saw sales increase $254 million to $913 million for the year from lower programming and production costs and higher ad revenues and affiliate fees at the network and owned TV stations.

In September, ESPN renewed its “Monday Night Football” contract with the NFL through 2021 for $800 million. Pact will add 500 additional hours of programming over the next eight years.

“There’s no question it was an expensive deal,” said Disney chief Bob Iger during a conference call with analysts. But “when we looked at the rights fees, if there’s anything that creates value for ESPN, it’s the NFL,” he said.

ESPN passed on the World Cup and the Olympics because they’re one-off events and “don’t justify the rights (fees) other people paid for them.” Iger said ESPN would air college basketball games to make up for lost NBA coverage.

At the Disney Channel, Iger said “Phineas and Ferb” is “well on its way to becoming a successful franchise for the company.”

Although Disney’s studio arm saw sales decrease 8% to $1.5 billion during the quarter, profits were up 13% to $117 million thanks to an unexpected $150 million worldwide haul from the 3D re-release of “The Lion King” in early September, which prompted Disney to plan similar 3D versions of “Beauty and the Beast,” “Finding Nemo,” “Monsters, Inc.” and “The Little Mermaid” over the next two years, starting with “Beast” in January.

Cost-cutting at the studio, lower marketing budgets, as well as fewer writedowns from disappointing pic perfs also helped. But for the year, studio revenue was down 5% to $6.4 billion while profits were off 11% to $618 million — mostly on comparisons with last year’s successes “Toy Story 3,” “Iron Man 2″ and “Alice in Wonderland” and continued declines in homevideo sales.

But “Cars 2,” “Pirates of the Caribbean: On Stranger Tides,” “Tangled,” “Thor” and “Captain America” and DreamWorks’ “The Help” were key players at the B.O. for the company.

While the studio has “done a good job” of “being vigilant in the cost structure, we’re not at the end,” Iger said. “We’ll continue to monitor that business” and continue to bring some production costs down, while “investing aggressively” in tentpoles like “The Avengers” and making lower-budgeted films like “The Muppets,” which he said has a budget of less than $50 million. “I like that balance,” Iger said.

Theme parks, long a gauge of consumer spending, saw sales increase an impressive 10% to $11.8 billion, driving profits up 18% to $1.6 billion for the year. Fourth-quarter revenue also was up 11% to $3.1 billion, with profits increasing 33% to $421 million, as tourists flocked to its domestic and overseas parks, particularly in Hong Kong and Paris, or set sail on Disney’s cruise line. Attendance from foreign guests, especially from Asia and Brazil, was up 10%.

Disney’s consumer products biz especially benefitted from “Cars 2″ and Marvel-related superhero merchandise, with sales up 14% to $3 billion for the year, sending profits up 21% to $816 million. The “Cars” franchise now earns more than “Star Wars” and “Toy Story” in retail sales of movie-themed merchandise, Iger said.

Division is expected to benefit next year from the release of “The Avengers” and Sony’s “The Amazing Spider-Man.” Disney recently brokered a new deal with the studio that enables the Mouse House to collect most of the coin from Spider-Man movie products.

Disney’s long-struggling interactive group also saw revenue increase to $928 million, up 29%, with losses down to $308 million. As the division continues to focus more on social-media games created by Playdom (it will release eight new titles next year), improved sales of console games and next fall’s relaunch of Disney.com, Iger expects the division to be profitable sometime in 2013. Fourth-quarter revenue was up 19% to $223 million while losses narrowed $10 million to $94 million.

For the year, however, Disney did write off $132 million from the closure of Robert Zemeckis’ ImageMovers Digital motion capture studio and abandoned film projects, as well as the shuttering of ESPN Zone eateries. Another $138 million in restructuring charges reflected severance costs; ImageMovers alone resulted in 450 pinkslips.

It earned $43 million from the sale of the Power Rangers to Haim Saban and $75 million from the sales of Miramax and ESPN’s BASS sports programming.

Iger declined to shed any light on who might succeed him when he leaves the CEO post in 2015 but said his tenure is “not as brief as people suggest.”

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