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Disney CEO Sees Growth in the Movie Business

Company profits rose 27% overall during the second quarter to $1.9 billion, while revenue increased 10% to $11.6 billion

Add Bob Iger to the list of high-ranking Hollywood executives who still see the film industry as a growing business for their media companies.

“We actually see growth in the motion pictures business,” said the Walt Disney Co. chairman and CEO during a call with Wall Street analysts Tuesday to discuss the company’s strong second quarter earnings.

While the Disney chief did not make reference to Jeffrey Katzenberg’s recent comments that “movies are not a growth business,” it was hard not to connect Iger’s statement to that of the DreamWorks Animation chief, and pair him with CBS’ Leslie Moonves and Universal’s Jeff Shell, who backed the film industry at last week’s Milken Global Conference.

Disney’s film division, in particular, fired on all cylinders during the three-month period that ended March 29, with the animated blockbuster “Frozen” and Marvel’s “Thor: The Dark World” especially performing well at the foreign box office, homevideo platforms, TV and subscription-based video-on-demand.

All of that helped the studio post impressive gains during the quarter, with revenue up 35% to $1.8 billion, and profits increasing from $118 million to $475 million.

Frozen,” which is now the highest-grossing animated hit of all time, has earned more than $770 million in overseas markets, and nearly $1.2 billion overall. The toon is the bestselling Blu-ray and digital download of all time, Iger said. During the quarter, products tied to the film also accounted for nine of the 10 top sellers at the Disney Store.

“Frozen” is “definitely up there with our top five franchises,” Iger said during the earnings call, and has gone “beyond anything that we ever imagined” in terms of its performance across all platforms.

Beyond “Frozen’s” unexpected success, Iger noted “Captain America: The Winter Soldier’s” impressive $680 million haul to date, which has far outpaced the original, the potential of Marvel’s “Guardians of the Galaxy” to launch a new franchise, and naturally “Star Wars: Episode VII,” which J.J. Abrams is about to start lensing in London.

“The strategy of making branded movies is working, and we’re only starting to see the beginning of it,” Iger said during the investor call. “I’m not going to predict we have another ‘Avengers’ on our hands, but that’s certainly a goal,” he said of “Guardians of the Galaxy,” whose characters have not yet been seen on the bigscreen in Marvel movies.

As for “Star Wars,” Iger reiterated that Disney and Lucasfilm plan to produce three more films and “at least” three spinoffs over the next decade.

The rabid interest from fans has caught even Disney offguard.

“We would be the first to admit even we’re surprised over the fervor and level of interest and passion in this property,” Iger said. “It’s amazing to us what kind of pent up demand there is,” he continued, adding that the studio feels good creatively about where the seventh installment, which brings back familiar faces and introduces new characters, is headed.

Overall, the Walt Disney Co.’s profits rose 27% during the second quarter to $1.9 billion, while revenue increased 10% to $11.6 billion.

“We’re extremely pleased with our results this quarter, delivering double-digit increases in operating income across all of our businesses and the highest quarterly earnings per share in the history of the company, (as earnings per share increased 41% to $1.11 during the quarter compared to last year),” Iger said in a separate statement. “Our continued strong performance reflects the strength of our brands, the quality of our content and our unique ability to leverage creative success across the entire company to drive value.”

Results also were upbeat at the rest of Disney’s divisions, which helped Disney post the strongest first half of the year in the company’s history.

Revenue at the company’s media networks rose 4% to $5.1 billion, while profits rose 15% to $2.1 billion.

Broken out, revenue at its cable networks, which include ESPN, Disney Channels and A&E Television, rose 5% to nearly $3.6 billion, while profits rose 15% to $2 billion. Profits at its broadcasting arm, which includes ABC, also rose 15% to $159 million, although ad sales were down at the network due to lower ratings for its shows, causing revenue to remain flat at $1.5 billion.

Iger stressed that ABC is profitable and that “we’re still viewing this business as a profit generating business.”

The timing of the Easter holiday affected Disney’s parks and resorts group, with revenue coming in 8% higher to $3.6 billion, while profits rose 19% to $457 million. Still, its theme parks in the U.S. enjoyed an uptick in guest spending due to higher average ticket prices, food, beverage and merchandise sales. Profits at its international parks were largely flat, although Hong Kong Disneyland enjoyed record attendance.

After announcing last week that Disney would invest an additional $800 million in the construction of Shanghai Disneyland, Iger said it’s likely that the company will spend even more money to expand that park in China, considering the 330 million people in the surrounding area who might visit the park after it opens in late 2015.

That “will deserve an infusion of more capital” given that “the returns will be rather significant for us,” Iger said.

During the second quarter, Disney’s consumer products arm saw revenue increase 16% to $885 million and profits rise 37% to $274 million, largely from Disney Channel, Mickey and Minnie, and “Planes” merchandise.

The interactive group also improved profits, earning $14 million compared to the loss of $54 million during the same year-ago frame. That was largely due to the success of “Disney Infinity,” which helped improve revenue by 38% to $268 million. Game was released during the company’s fourth quarter of 2013. Group also saw gains in its mobile business in Japan.

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