Walt Disney Co. (DIS:US), the world’s largest entertainment company, said third-quarter profit was little changed amid costs to market the box-office disappointment “The Lone Ranger” and shrinking revenue at ABC television.
Net income rose to $1.85 billion, or $1.01 a share, from $1.83 billion, or $1.01, a year earlier, Burbank, California-based Disney said today in a statement (DIS:US). Profit came to $1.03 a share excluding items, compared with the $1.01 average of 30 analysts’ estimates compiled by Bloomberg.
“Given the number of headwinds we faced, we are very pleased with the financial results we delivered,” Chief Financial Officer Jay Rasulo said on a call with investors.
Disney expects to record a loss this quarter of as much as $190 million on “The Lone Ranger,” which cost $225 million to make and has produced less in worldwide sales. The company’s ESPN, A&E and domestic children’s cable channels, along with the popular theme parks, continue to spur growth for Disney as film profits slide and the ABC broadcast division struggles.
Disney fell 1.7 percent to $65.88 in extended trading (DIS:US) after results came out. The stock rose 1.6 percent to $67.05 at the close in New York and has gained 35 percent this year.
Sales increased 4.4 percent to $11.6 billion in the period ended June 29, compared with the $11.7 billion average of 27 analysts’ estimates.
“There has been a lot said I know about the risk of basically high-cost, tentpole films, and we certainly can attest to that given what happened with ‘Lone Ranger,’” Chairman and Chief Executive Officer Robert Iger said on the call. “We still believe that a tentpole strategy is a good strategy. One way to rise above the din and the competition is with a big film, not just a big budget, but a big story, big cast, big marketing behind it.”
Disney’s film studio posted a 36 percent drop in profit to to $201 million due to pre-release marketing costs of the “The Lone Ranger” and lower revenue from “Iron Man 3” compared to last year’s megahit “The Avengers.”
“The Lone Ranger,” featuring Armie Hammer in the title role and Johnny Depp as his sidekick Tonto, has collected $176 million in worldwide ticket revenue since its July 3 release, according to Box Office Mojo, an industry website. Studios split those receipts with theater owners and incur additional costs marketing their pictures.
Operating income at Disney’s media networks, the company’s largest group, rose 8.2 percent to $2.3 billion. Growth in fees from pay-TV services and advertising at networks, including ESPN, countered higher programing costs and lower revenue from the ABC broadcast business. Sales increased 5.3 percent to $5.35 billion, Disney said.
Costs at the ABC network rose as the broadcast division aired fewer shows made internally and acquired more programming from outside producers, according to the statement. The ABC network lost about 6 percent of its viewers in the TV season that ended in May and saw a 10 percent drop in the younger viewers that advertisers target, according to Nielsen data.
Investments and an improving economy lifted profit at Disney resorts and theme parks, where earnings increased 9.4 percent to $689 million on 7 percent higher attendance and more spending by tourists.
The company said projects such as MyMagic+, a wristband for guests that serves as an admission ticket, room key and credit card, led to higher costs. The Florida parks are benefiting from the new Disney’s Art of Animation resort and the expansion of the Magic Kingdom.
Consumer products operating income rose 4.8 percent to $219 million, while losses at the company’s interactive division increased to $58 million from $42 million a year earlier.
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