The earnings that the Walt Disney Co. unveiled Tuesday may not have wowed Wall Street quite as much as in recent quarters, but gains were surprisingly solid in most segments for the Mouse House’s fiscal second quarter ended March 31.
Total revenue of $8.1 billion was up 1% from the year-ago level of $8 billion, and operating income rose 25% to $1.8 billion from $1.4 billion. On a per-share basis, the operating net far exceeded analysts’ estimates.
Studio revenues dropped 13% to $1.55 billion on tough comparisons with the prior year’s strong roster, including international bows of “The Chronicles of Narnia” and “Chicken Little.” But having fewer mega-releases, combined with recent cost-cutting initiatives, helped minimize expenses and drove the studio’s operating income up 60% to $235 million.
While it accounts for just one-fifth of overall revenues, the Disney studio division is closely tracked by Wall Street. The net effect of the Pixar deal, for example, will be weighed by some in the B.O. of June release “Ratatouille.” And the recent refocusing on franchise building will come into play with “Pirates of the Caribbean: At World’s End” over Memorial Day.
In a conference call with analysts, CEO Robert Iger reported having seen “Pirates 3,” which he called “simply great.” He also touted “Ratatouille” as “the most gorgeous animated movie I have ever seen.”
He declined to take one analyst’s bait and forecast an opening weekend for the “Pirates” sequel, but he said record tallies for “Spider-Man 3” show that “moviegoers are excited to be going back to big movies and sequels to movies they’ve loved before.”
As for the so-so B.O. generated by “Meet the Robinsons” during the quarter ($92 million thus far in the U.S.), he noted the toon was mostly finished before the Pixar acquisition closed. And while he insisted the integration of Pixar was progressing well, he said, “It won’t be fair to judge” until the release of “American Dog” in 2008.
Elsewhere in the company, TV networks helped pace the overall performance. The cable group’s operating income increased 19% to $963 million for the quarter, mainly on growth at ESPN and at overseas Disney Channels, which are now seen in 127 countries and expanding local production activities.
Though the Super Bowl on ABC in the year-earlier period led the current period’s revenue to sag 7% for the Alphabet, operating net for ABC gained 33% to $212 million. Stateside and overseas syndie sales of shows such as “Desperate Housewives,” “Lost,” “Grey’s Anatomy” and newer fare, as well as ad rates for primetime shows, posted “double-digit” growth, according to chief financial officer Thomas Staggs.
The theme park unit also posted robust numbers. Sales rose 9% to $2.4 billion, while operating income 19% to $354 million thanks to strong bookings at Disneyland Resort Paris and favorable exchange rates for Europeans visiting U.S. parks.
Shares gained a bit more than 1% to $36.55 but then gave back almost as much after hours. After a run-up of 20% in the latter months of 2006, the stock has recently moved sideways, trading in a narrower range between $34 and $37.
On the conference call, Iger hit on a few industry issues, clarifying Disney’s positions on a few topics.
- The DVD format war. Disney supports Blu-ray, and Iger said an embrace of HD-DVD as either a parallel format or a replacement for Blu-ray is unlikely.
- Strike prep. Like his peers at other media congloms, Iger acknowledged the building drumbeat of strike preparations. “A lot of posturing is going on, and the issues are really complicated,” he said. “A lot of time is being spent on this, a lot of rhetoric.”
- Window tinkering. Iger poured a bit of cold water on Comcast chief operating officer Steve Burke’s bullish forecast, at the NCTA confab in Las Vegas, of firstrun pics receiving day-and-date distribution in theaters and on pay-per-view cable. “We’re not in discussions to sell movies to cable in the same window as theatrical,” he said.