Disney Turns Profit Despite Sagging Movie Revenue10 May, 2006 By: Jessica Wolf
Tough video comparisons resulted in a shortfall in second-quarter revenue at The Walt Disney Co.'s studio segment, which includes theatrical and home video revenue.
Revenue in the segment fell 22%, to $1.8 billion, and operating income fell 39%, to $147 million, compared to the second-quarter 2005, which included sales from the March DVD release of The Incredibles.
The Chronicles of Narnia: The Lion, the Witch and the Wardrobe video sales are strong, executives said, but will mostly be realized in the third quarter, though continued theatrical performance of the fantasy flick helped prop up the lag in video sales for the second quarter.
“We knew we were going to have tough home video comparisons because we had The Incredibles last year,” said CFO Thomas O. Staggs.
Disney expects theatrical and video revenue to ramp up in the final two quarters of the year with the release of Pixar's Cars and the adventure sequel Pirates of the Caribbean 2: Dead Man's Chest. The Pirates sequel represents Disney's increased focus on branded content lines, said president and CEO Bob Iger.
Company-wide net income increased 12%, to $733 million, for the quarter ended April 1. Income for the fiscal first half was up 9% to $1.5 billion over the prior year. Revenue for the company was up 3% to $8 billion for the quarter, and 2% to $16.9 billion for the mid-year point.
Executives expect 2006 to be the fourth consecutive year of double-digit growth.
Transitions in the wake of Disney's Pixar acquisition are going very smoothly, Iger said.
“Nothing is more important than creativity to Disney's success,” Iger said, touting the studio's successful acquisition of creative powerhouse Pixar.
The Disney Co.'s recently announced offering of top ABC programs like “Lost” and “Desperate Housewives” for free on an advertiser-supported Web site ABC.com is an example of the company's future strategy, Iger said.
“Disney will continue to distribute its assets, or platform-specific content, to best take advantage of emerging platforms and consumer trends,” he said.
Iger declined to give firm numbers on streaming activity on the ABC site, but said the advertisers are pleased, consumer feedback is great and that all signs indicate this kind of use of technology creates incremental consumption.
“This is not an experiment,” he said. “We are in this for the long haul.”
Iger did say that ABC and Disney shows have garnered 5 million downloads via iTunes since Disney released titles to that service in October 2005.