Gains in revenue (7%) and net income (11%) keep strong conglom reports rolling
After a round of strong quarterly earnings from media congloms, the Walt Disney Co. didn’t disappoint in its results as revenue up 7% to $10.7 billion helped net income rise 11% to $1.5 billion.Every division at the Mouse House enjoyed a considerable uptick in revenue during the company’s third quarter, which wrapped up July 2, except the studio, which was flat despite hits like “Pirates of the Caribbean: On Stranger Tides,” “Cars 2” and “Thor.” Disney’s TV networks, which typically generate a third of the company’s earnings, hauled in $4.9 billion during the period, up 5% over last year’s quarter, while profits rose 11% to $2 billion. ESPN, whose growth led the 7% gain in revenues of $3.5 billion and a $1.8 billion profit haul among cable channels, received much of the credit. In a conference call with analysts and investors, Disney chief Bob Iger touted ESPN’s ad sales during the upfronts and its audience of 107 million people who “read, watch, listen or log on to ESPN-branded media” each week. He was high on earnings from Pac-12 college sports broadcasts and a 12-year pact for the U.S. rights to Wimbledon. Disney Channel also saw subs increase and ratings rise 10% during the quarter; it recently scored with its “Phineas and Ferb” tele-pic. Ad revenue was up at ABC, but revenue for the broadcaster was off 1% to $1.4 billion. Profits came in at $250 million, driven by lower programming and production costs. The Mouse House’s parks and resorts biz saw revs rise 12% to $3.2 billion which helped profits increase 9% to $519 million. The industry typically keeps a watchful eye on this area of Disney’s earnings, given that theme-park attendance is often driven by consumer spending and how comfortable they feel about the economy. Increased attendance was helped by the timing of the Easter holiday, with domestic visits up 2%. Without Easter, attendance would have been up 1%. Ticket sales took at hit at Tokyo Disney Resort due to the March earthquake in Japan. Improvements at its Hong Kong Disneyland Resort helped boost attendance and guest spending at the park which Disney hopes will rub off on Anaheim’s California Adventure, once its $1 billion overhaul is completed next year with the opening of “Carsland.” Iger said the improvements were necessary to “include lengths of stays and correct a perception problem” at the park. Already the inclusion of the “World of Color” show and a new “Little Mermaid” attraction has boosted attendance. “Our investment is starting to deliver returns,” Iger said. Company is expanding Fantasyland at the Magic Kingdom in Orlando, Fla.,the most popular park in Disney’s portfolio, as part of the first enhancement there since its 1971 opening. It’s also adding a Toy Story Land at Hong Kong, while it builds a Disneyland in Shanghai to take advantage of significant growth in the Chinese economy and leisure travel there. Disney’s Cruise Line also sailed off with strong results during the quarter due in part by the launch of its Disney Dream ship. The box office performance of Marvel’s “Thor” and Pixar’s “Cars 2” didn’t live up to last summer’s successes of “Iron Man 2” and “Toy Story 3” for the film studio, with revenues coming in at flat at $1.6 billion and profits plummeting 60% to $49 million, caused by lower worldwide hauls and film write downs. The high cost to market and distribute “Pirates of the Caribbean: On Stranger Tides” offset its $1 billion worldwide haul during the quarter. Studio is still paying for the closure of Robert Zemeckis’ ImageMovers performance capture studio (behind “Mars Needs Moms”) outside San Francisco, which in addition to abandoned film pro-jects, forced the film arm to write off $126 million during the quarter. It also counted restructuring charges of $86 million from severance costs related to a round of layoffs in June, which shed around 200 positions. Iger was “excited” about the studio’s upcoming pics, which include the “Muppet Movie,” “The Avengers,” “John Carter,” “The Odd Life of Timothy Green,” “Wreck-It Ralph” and “Brave.” Disney will promote the titles Aug. 19-21 at the D23 Expo, held at the Anaheim Convention Center. Iger was especially high on the prospects of “The Avengers” turning into another “franchise” for Disney, leading to its own sequels and spinoffs after next year’s pic hits theaters. The Disney chief said the studio was going to keep a closer eye on the production costs of its films in the future, rather than look to trim more overhead costs in terms of staff reductions. “Trends haven’t been heading in a more positive direction,” he said when it came to pricetag of the studio’s slate. And that could lead to Disney reducing the number of pics it produces. “We feel we’re better off by reducing the size of the slate and making films that are bigger and increasingly more risky,” he said. The “Cars” franchise and licensing deals around Marvel’s characters continued to rev up revenue for Disney’s consumer products arm, which reported a 13% increase in sales of $685 million, which helped the division post a 32% boost in profits of $155 million, the largest gain among any of Disney’s divisions. Meanwhile, the acquisition of social gamemaker Playdom dragged down profits at the interactive group, which reported an $86 million loss during the quarter. The pick up helped increase revenue, however, which were up 27% to $251 million. The group also benefitted from stronger console games of titles like “Cars 2” and “Lego Pirates of the Caribbean: The Video Game.” With the markets rebounding Tuesday, Disney’s stock rose $1.67 to close at $34.70, a gain of 5%.