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Mouse mints profits behind ‘Millionaire’

Year of transition shows growth in b'casting, parks, resorts

ABC’s primetime phenom “Who Wants to Be a Millionaire” helped make a winner out of the Walt Disney Co. as the Mouse House reported Thursday a better-than-expected 20% improvement in fiscal third-quarter profit.

Record operating results in broadcast and cable TV operations overall were backed by robust theme-park performance, as the Burbank-based entertainment behemoth reported net income of $440 million for the three-month period ended June 30. That compared with a $368 million profit in the year-earlier period.

Disney also provided comparisons that stripped out its money-losing Internet business, including a 48% boost in quarterly net income to $633 million.

Using a pro-forma comparison to adjust for purchases and divestitures since the year-ago period, Disney showed a healthier-still 79% profit surge, even including the struggling dot-com business. Disney reported on Wednesday that its Go.com — newly rechristened the Walt Disney Internet Group — saw a quarterly loss of $272.2 million.

Revving up

Across all Disney operations, revenue rose 9% on a pro-forma basis to $5.96 billion.

“They were very strong results, particularly the media networks division,” PaineWebber analyst Christopher Dixon said. “They attest to the continued strength of the TV advertising market — a strength we think is going to continue well into the next year.”

Disney chairman and CEO Michael Eisner said, “I am pleased to see the momentum continue to build at our company.”

In a conference call with analysts, Disney president and chief operating officer Robert Iger minimized concerns over summer ratings slips for “Millionaire” and said the gameshow helped ABC grab 30% of the $8 billion in advertising revenue in the spring upfront ad market.

“This program is one of those rare programs that attracts viewers of all ages,” Iger said. It “continues to outperform its primetime competition.”

Disney’s media networks division, which in addition to ABC includes cable operations such as the massive ESPN sports net, posted a 20% rise in revenue to $2.27 billion in the latest quarter in a pro-forma comparison with the year-ago period. ESPN marked higher programming costs during the period, officials said.

In its parks and resorts operations, Disney enjoyed record levels in attendance, hotel occupancy and profitability, Eisner said. Revenue rose a pro-forma 13% to $1.94 billion.

The studio-entertainment division posted a decline in film revenue in a quarter marked by the release of “Dinosaur,” “Gone in 60 Seconds” and “Shanghai Noon.” Greenlighting fewer films and reining in talent costs and other expenses ultimately will help return Disney’s filmmaking operation to a more profitable track, Eisner said.

“The studio business is important for us in many ways,” he stressed. Revenue at the studio and entertainment division fell 2% to $1.24 billion. It was Disney’s only unprofitable operating unit, spilling $3 million in red ink.

Domestic theatrical motion picture declines were partially offset by increases in network TV distribution, worldwide homevideo and stage plays, officials said.

Consumer products revenue was off 11% to $511 million. Declines in worldwide merchandise licensing were exacerbated by increased advertising and international infrastructure costs. Iger said declines in adult apparel sales were partially offset by revenue from new interactive items, including “Millionaire” games.

Mulling over merch

Disney has been attempting to revitalize its stagnant consumer productions operations with a review of inventory aimed at eliminating slower-moving fringe merchandise and introducing some fresh items in a process expected to take at least another quarter or two to bear results.

“At the beginning of fiscal 2000, we indicated it would be a year of transition,” Eisner said. “Our broadcasting and parks-and-resorts businesses have already shown strong growth, and we believe that we have strategies in place at our studios and consumer products units to produce growth in those units as well.”

Citing the concerns he’s recently expressed to Congress that the pending America Online/Time Warner megamerger will stifle competition, Eisner nevertheless expressed confidence that Disney’s bottom line won’t be affected by the specter of such a combination.

“I think Disney more than any other company manages to get its products before consumers no matter what the circumstances are,” Eisner told analysts. “That said, we don’t want individual companies to create bottlenecks.”

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