Disney Profit Soars

[PopPhan]

Official report:



NEW YORK (CNNMoney.com) -- Walt Disney Co. posted fiscal third-quarter results Tuesday that topped Wall Street's expectations, led by rebounding sales at its television networks and movie studio divisions.

The Burbank, Calif.-based media giant said quarterly net income rose to $1.3 billion, or 67 cents per share, up 40% from a year earlier. Analysts polled by Thomson Reuters expected earnings of 58 cents a share.

Sales rose 16% to $10 billion in the third quarter, beating the $9.4 billion in revenue that analysts had forecast.

"We're very pleased with our strong third quarter, in which we grew revenues substantially and improved profitability across the majority of our businesses," chief executive Robert Iger said in a prepared statement.

Disney, which owns ABC and ESPN, reported a 19% jump in sales at its media networks unit, driven by increased advertising revenue and growth at cable network ESPN.

"The big upside surprise was driven by recognizing more deferred revenue from ESPN, but ESPN's business was better than expected even backing that out," said Alan Gould, an analyst at Soleil-Gould Research Corp. "Over 50% of Disney's value is their cable network business and the majority of that is ESPN, so the single most important variable to look for is what the underlying economics of ESPN are."

Advertising revenue at ESPN jumped 31% in the quarter, boosted by major sporting events including the the World Cup. But even without these events, Iger said the cable network has continued to improve.

"While the World Cup was a sensational hit for ESPN in the quarter, its impact on the bottom line didn't necessarily drive the quarter," Iger said in an interview with CNNMoney's Poppy Harlow. "ESPN's success is basically from a collection of programs and its strength is evidenced quarter to quarter, year to year."

Sales at Disney's movie studios climbed 30%, thanks to the success of blockbuster hits including Iron Man 2, Alice in Wonderland, and Toy Story 3.

The theme parks unit, the company's second-biggest division, didn't fare as well. Sales at Disney's parks and resorts rose a modest 3%, while operating income fell 8% as attendance and consumer spending remained sluggish in the quarter.

The division also struggled due to labor, pension, and Medicare costs and a calendar shift that resulted in one less Easter holiday week in the quarter, according to Jay Rasulo, Disney's chief financial officer, on an earnings call with investors.

When asked about overall economic conditions, Iger told CNNMoney's Harlow that it's a "complicated time."

"This is a difficult economy...there are some real challenges out there in a country that's fairly expensive to run and we've got to do a better job reducing expenses and figure out how to improve revenue," he said.

But Disney's recent success may indicate a positive trend for the U.S. economy.

"I look at things from a Disney perspective, and Disney's ability to operate in this country and the world is demonstrable," he added.

Shares of Disney rose more than 1% in after-hours trading after gaining 0.4% to close at $35.29 a share in regular trading.

Disney joins other big media rivals, including CBS, News Corp. and Time Warner, which is the parent of CNNMoney.com, in reporting results that were better than what analysts had expected.

[Tekneek]

So much for the theme parks running strong.

[DizneyRox]

I remember a time when the resorts propped up the rest of the company, I wonder what changed?!?

[Mickey91]

I remember a time when the resorts propped up the rest of the company, I wonder what changed?!?

Probably the difference of $20 for a movie vs. $2000 for a vacation. Disney isn't the only ones raising prices higher and faster than people are getting cost of living increases. I don't know about you, but our raises don't come close anymore to covering the price of living expense increases. Just about everything in the food isles are double what they were 2 yrs ago especially staples and the food you associate buying more of when funds are low, and they have been for at least a year now. And don't even get me started on gas prices. Ever since Katrina, the oil and gas companies have used every gnat fart as an excuse to raise prices. In other words, the economy. People have cut back on trips and are doing more little things at home.

But, that said, I don't think Disney has done themselves any favors either. Their merchandise in the last ten years has dramatically fallen in quality and variety. Couple that with the constant increase in resort and ticket costs and you have the formula for people not spending as much in the shops and fewer people able to come to the resort in the first place. We have a fixed amount we are able to put toward our trips. If we spend all of it on the tickets and room, we won't be spending in the gift shops. And, if I only have a little to spend, I will be way more critical of what I spend it on.

And, as prices continue to go up in the real world for things like insurance, utilities, gas for the car, and food, our vacation cash will also become less. I can definitely see a time when we will be forced to choose a new destination and/or curtail our trips to every five years or so.

[wdwfansince75]

The real message here is that without a better than expected World Cup, and the performance of the US team, all of Disney, including ESPN, would have had a bad year. Since the WC was a single quarter spike, next quarter will be more indicative of the whole year. Revenues are down, costs are up....And unlike the government, Disney cannot simply print more money.

[Ian]

"This is a difficult economy...there are some real challenges out there in a country that's fairly expensive to run and we've got to do a better job reducing expenses and figure out how to improve revenue," he said.Ugh ... this business school thinking drives me crazy!

You're in an ENTERTAINMENT BUSINESS! You can't "reduce expenses" to solve your problem!

This is why it's totally wrong to have MBA's running a creative company. They just don't get it and they never will.

[Mickey91]

Ugh ... this business school thinking drives me crazy!

You're in an ENTERTAINMENT BUSINESS! You can't "reduce expenses" to solve your problem!

This is why it's totally wrong to have MBA's running a creative company. They just don't get it and they never will.

Exactly!!

[Figment!]

Ugh ... this business school thinking drives me crazy!

You're in an ENTERTAINMENT BUSINESS! You can't "reduce expenses" to solve your problem!

This is why it's totally wrong to have MBA's running a creative company. They just don't get it and they never will.

... maybe my program is the exception, but my my MBA curriculum is far from being the Chainsaw Al school of business.

Properly managing a balance between expenditure and product quality is an overlooked task in more than just the entertainment industry. In the engineering/technical field, I've been faced with guiding my company away from a "penny wise, pound foolish" action on a great number of occasions.

Myopia is disastrous for a business no matter where the focus is. Spending more than you can recover on a product or diminishing the quality of the product to the point where it won't sell --the end result is the same.

In my view point, a holistic view of business operations achieving the optimal balance between quality and cost is the best business approach regardless of the industry.

[MidnTPK]

You're in an ENTERTAINMENT BUSINESS! You can't "reduce expenses" to solve your problem!

This is why it's totally wrong to have MBA's running a creative company. They just don't get it and they never will.
This like complaining about the tide coming in every day...Disney operates in the financial world....there's no going back.

If it's not profitable, it stock goes down. If Disney does not run itself as a profitably, it will be acquired for its brands. Would you prefer it become a division within Comcast?

What's your beef with MBAs?

[PopPhan]

If I can comment on Ian's statement....

It's not that reducing costs is so bad, it's that the quality of "product" tends to diminish as well. In the manufacturing world, "Hard Goods," this can be overlooked to some extent as the products are deemed necessary. In entertainment, if you put out an inferior "product" people will stop paying $$$ to see/hear/buy.

Entertainment is a "luxury buy" that is dependent on putting out a quality product. Sports is a good example -- put out an inferior team and generally (with some notable exceptions) you will stop filling the stands.

[MidnTPK]

It's not that reducing costs is so bad, it's that the quality of "product" tends to diminish as well.
Really?

What if reducing expenses means fewer suits and more customer-interactive staff in the parks?

Or movies with better scripts and fewer special effects?

Or fewer people at corporate doing accounting?

Or cheaper news anchors at local stations....I mean do you really need a local/overpaid pseudo-celebrity reading from a teleprompter, or would a bright recent graduate do the job better?

[princessgirls]

The MBA's are ALL ABOUT THE BOTTOM LINE!!!

They don't care about how it all gets done or who does what...

I have had a conversation with a friend who is a CM, that Disney will try to squeeze and squeeze but if they get enough complaints or numbers are dipping, they will make changes.

Julie:mickey:

[PopPhan]

Really?

What if reducing expenses means fewer suits and more customer-interactive staff in the parks?

Or movies with better scripts and fewer special effects?

Or fewer people at corporate doing accounting?

Or cheaper news anchors at local stations....I mean do you really need a local/overpaid pseudo-celebrity reading from a teleprompter, or would a bright recent graduate do the job better?

Notice those are all "IF"s....In a perfect world that would be the correct answer, but this is far from a perfect world.

In reality...
Customer-Interactive staff is cut well before "suits", mainly because it is the "suits" doing the cutting....
Special Effects are there because there are few "better" scripts....(How many ORIGINAL ideas have been made into movies and TV shows recently?????)
Corporate accounting is rarely the first to go because they find the ways to squeeze the dimes to get the pennies saved....
I watch my local news -- when any of them can read from a teleprompter, let me know....

Even in the line you quoted, I qualified it with the word "TENDS," as in 'this is not always the case.'

[Mickey91]

Really?

What if reducing expenses means fewer suits and more customer-interactive staff in the parks?

Or movies with better scripts and fewer special effects?

Or fewer people at corporate doing accounting?

Or cheaper news anchors at local stations....I mean do you really need a local/overpaid pseudo-celebrity reading from a teleprompter, or would a bright recent graduate do the job better?
Well, if Disney would do this it might be okay. But they tend to make inferior products and try to sell them for more than their once quality merchandise.

And, I don't notice more CMs in the parks. And, there is such a thing as cutting too much lower management (Those in direct contact with the CMs and better trained to help them deal with situations as they arise) and not get rid of enough higher ups.

You can belly ache all you want, but Ian hit the nail on the head with this one.

Disney was making a profit before all the cuts in quality and uniqueness, just not as much. I call that greed and it is going to be Disney's downfall if it continues.

[dnickels]

Why do you all keep returning to WDW if the quality of the product (merchandise and vacation experince) has gotten so poor?


:thumbsup:

I've wondered that as well. I've lost track of the number of posts/posters saying they won't be back for at least X number of years (except for that upcoming trip listed in their sig line which apparently doesn't really count), or who threaten to take their hard earned dollars elsewhere (just like they did a year ago and a year before that - the 'find all posts by' / 'find all threads started by' links are nice and handy for that).

If most aren't willing to put their money where their mouth is (or maybe where their keystrokes are) It's no wonder Disney continues down the same path.

[Ian]

If most aren't willing to put their money where their mouth is (or maybe where their keystrokes are) It's no wonder Disney continues down the same path.I don't disagree and I'm guilty.

But I've said before that I do it for my kids. If it was just DW and I we would not still be going.

Disneyland yes, but not Walt Disney World.

[DizneyRox]

If most aren't willing to put their money where their mouth is (or maybe where their keystrokes are) It's no wonder Disney continues down the same path.
Having gotten married at WDW, we try to go back every year for our anniversary. It will be our ten year anniversary next year and we've decided on a RCCL cruise. St. Thomas here we come! The wife is pretty happy as that means DIAMONDS!

There's money to be spent, it's just not getting spent at DIsney next year, which is a fairly significant milestone...

[princessgirls]

You haven't seen cuts at Disney like the ones we saw in SeaWorld in June.

We loaded ourselves on the rides...the only worker on the platform at all times of the day was the one who checked to make sure your seat belts were properly fastened.

I heard a few of the "shirts" talking about the future of the Shamu show. It's terrible now, with big gaps in it where there used to be trainer/whale interaction. Now it's just music.
They also cut the number of shows per day, and the whole Shamu name is just not bringing people into the park like it did before the tragedy in February.

There were no employees, and the ones that do work there, other than the trainers, were mostly foreign exchange students.

Trust me...even my husband noticed. Maybe he noticed because the beer tent is no longer available either...Anheiser-Busch sold Busch/Gardens/SeaWorld and Seasame Place last year.
Don't even get me started on the food...and drinks. Yes, SeaWorld charges $1.00 more than Disney does for a bottle of soda. $3.50 for soda and water. $4.00 for gatorade.

Julie:mickey:

[Mickey91]

You haven't seen cuts at Disney like the ones we saw in SeaWorld in June.

...Anheiser-Busch sold Busch/Gardens/SeaWorld and Seasame Place last year.
Don't even get me started on the food...and drinks. Yes, SeaWorld charges $1.00 more than Disney does for a bottle of soda. $3.50 for soda and water. $4.00 for gatorade.

Julie:mickey:
But at least Sea World has the excuse of new ownership. It is ashame. I hope the new owners will evaluate and make necessary improvements to get things back to normal.