Bloomberg News

Disney Profit Rises 12% on Growth at ESPN, Domestic Theme Parks

February 09, 2012

Feb. 8 (Bloomberg) -- Walt Disney Co., the largest U.S. entertainment company by market value, said first-quarter profit rose 12 percent on growth at ESPN and its U.S. resorts.

Net income grew to $1.46 billion, or 80 cents a share, from $1.3 billion, or 68 cents, a year earlier, Burbank, California- based Disney said yesterday in a statement. Profit beat the 71- cent average of 27 estimates compiled by Bloomberg. Sales gained 0.6 percent to $10.8 billion in the period ended Dec. 31, missing estimates of $11.2 billion.

Higher fees from pay-TV operators drove profit at cable channels led by ESPN, the most-watched sports network, the company said. Theme parks benefited from increased consumer spending, rising attendance and higher prices. Together the two units accounted for 77 percent of Disney’s operating income last year and 60 percent of sales. Studio profit rose as spending on films declined.

“The company has a lot of growth ahead of it this year,” said Robin Diedrich, an analyst at Edward Jones & Co. in St. Louis, who recommends investors buy the stock. “Most of that will come from the theme-parks business, advertising and subscriber fee growth.”

Disney fell 1.4 percent to $40.40 yesterday in extended trading after the results. The stock rose 1.3 percent to $40.98 at the close in New York and has gained 9.3 percent this year.

Profit from cable television, which includes ESPN and the Disney Channel, increased 25 percent $967 million on higher affiliate fees and advertising gains at the children’s channel. In January, the company reached a 10-year programming agreement with Comcast Corp., the nation’s largest pay-TV service, providing increased payments for renewed rights to its networks.

Pay-TV Fees

Fees from pay-TV operators will continue to grow due to agreements with Comcast and other providers, Chief Executive Officer Robert Iger said yesterday on a conference call. Disney doesn’t expect pay-TV subscribers to cancel service as more content becomes available online and won’t consider selling channels individually, he said.

Cable revenue increased 8 percent to $3.31 billion. Ad revenue at ESPN was little changed as a result of the work stoppage in professional basketball and college football bowl games that took place in January this year.

The ABC broadcast unit, which was also part of the Comcast accord, posted 23 percent lower profit of $226 million on sales that fell 7 percent $1.47 billion. Lower political advertising and higher marketing costs contributed to the decline.

Disney is in talks with Univision Communications Inc. to create a 24-hour English-language cable-news channel, two people with knowledge of the situation said this week. Iger declined to comment on the talks.

Park Profits

Profit at Disney’s parks and resorts rose 18 percent to $553 million on revenue that rose 10 percent to $3.16 billion. The company raised ticket prices last year. A new cruise ship, the Disney Dream, entered service in January 2011, and Iger said the Disney Fantasy completed trials in the North Atlantic.

“Generally the numbers at our parks are very encouraging,” Iger said on CNBC. “We’ve had increased attendance. We’ve had increased spending when people come. I think that says a lot about the American consumer.”

Park reservations are “pacing up mid-single digits” in percentage terms from a year ago while “booked rates are also up mid-single digits,” Chief Financial Officer Jay Rasulo said on the call.

The Disney film studio posted a 10 percent gain in profit to $413 million. Revenue tumbled 16 percent as the company continues to reduce production.

Disney Films

Seven Disney films in U.S. theaters in the quarter collected ticket sales of $239 million, a 33 percent drop from $357.6 million generated by nine movies a year ago, according to Box Office Mojo, an industry researcher.

The studio is in talks with Coinstar Inc.’s Redbox and other services to impose a 28-day delay on rentals of new DVDs, Iger said on the call. The delay is being sought because of the industrywide drop in DVD and Blu-ray sales, he said.

The consumer products unit reported profit little changed at $313 million on a 3 percent higher sales of $948 million.

Disney’s interactive division registered a loss of $28 million. Sales tumbled 20 percent to $279 million. The unit is cutting costs and taking steps to raise revenue with a goal of becoming profitable in the next fiscal year, Iger said. It hasn’t shown a profit since Disney began breaking out the results in the final three months of 2008.

--Editors: Rob Golum, Anthony Palazzo

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus