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Disney Ups Q4 Studio Operating Income 13%

10 Nov, 2011 By: Erik Gruenwedel

'The Lion King' 3D and Blu-ray Disc help studio overcome underperforming theatrical sequels.

Walt Disney Studios reported fourth-quarter (ended Oct. 1) operating income of $117 million, up 13% from operating income of $104 million during the previous-year period.

Filmed entertainment revenue declined 8% to $1.45 billion from $1.6 billion last year due in large part to the theatrical underperformance of Cars 2 compared to Toy Story 3 in the previous-year period.

The studio, which includes Walt Disney Studios Home Entertainment, said better overall performance of The Lion King 3D and The Help, compared to The Sorcerer’s Apprentice, You Again and Step Up 3 in the prior-year quarter helped overcome lower home entertainment sales volume of packaged media and and decreased sales of catalog titles internationally.

For the year, operating income dropped 11% to $618 million from $693 million, while revenue dropped 5% to $6.3 billion from $6.7 billion.

The decreased theatrical results reflected the stronger overall performance of key prior-year titles, Toy Story 3, Alice in Wonderland, Iron Man 2 and Princess and the Frog compared to the current-year performance of Cars 2, Pirates of the Caribbean: On Stranger Tides, Tangled, Thor and Captain America.

Decreased home entertainment results reflected a change in the transfer pricing arrangement between the studio and media networks for the distribution of media networks home entertainment product and lower domestic sales volume.

These decreases were partially offset by higher unit sales and improved net effective pricing internationally which benefitted from a higher Blu- ray sales mix.

In a call with analysts, CFO Jay Rasulo said home entertainment results were negatively affected by lower unit disc sales of key titles domestically and catalog titles internationally.

CEO Bob Iger characterized the state of digital content licensing to third parties as being in the “preseason,” adding that the studio is being “paid nicely” thus far by subscription VOD platforms such as Netflix, Amazon and others.

“It is a very interesting time for content owners,” Iger said. “We are only seeing the beginning of the beginning of that.”

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