Disney's Profit Jumps 41%
As ABC Ratings Improve
By KATE KELLY
Staff Reporter of THE WALL STREET JOURNAL
August 9, 2005 6:40 p.m.
Buoyed largely by the strength of its television division, Walt Disney Co. posted a 41% increase in profit for its fiscal third quarter, extending a hot streak for the entertainment giant that began in 2004.
For the quarter ended July 2, the Burbank, Calif. entertainment company reported net income of $851 million, or 41 cents a share, as revenue rose 3% to $7.72 billion. That compares with a year-earlier profit of $604 million, or 29 cents a share, on revenue of $7.47 billion.
The results beat earnings expectations from analysts at Thomson First Call, who had predicted a 38 cent-per-share performance. Income growth "has been an ongoing theme at Disney for the past two years, and it is very gratifying to see it continue," said chief executive Michael Eisner in an investor call, his last before stepping down from that post on Sept. 30. He'll be succeeded by current president and chief operating officer Robert Iger.
Disney's upbeat earnings announcement came at the heels of another victory for the company: a Delaware judge's ruling that Disney's directors didn't breach their fiduciary duty in the 1996 termination of president Michael Ovitz. (See full story.)
After Mr. Ovitz's ouster, which came only 14 months into his tenure at Disney, company shareholders sued board members for more than $262 million in damages, claiming directors hadn't adequately overseen the hiring or firing of Mr. Ovitz, a onetime friend of Mr. Eisner. In yesterday's ruling by Chancery Court Chancellor William Chandler, the executives were chastised for not paying closer attention, but were not forced to pay any of the requested damages.
Disney's media-networks division, which houses the ABC television network and a bevy of pay-TV stations, including the ESPN sports network, was the main driver of the earnings growth. Fueled by prime-time hits like "Lost," "Grey's Anatomy," and "Desperate Housewives," operating income popped 48% to $998 million. Such successful programs "have brought millions of viewers back to ABC," said Mr. Eisner, "and we expect them to remain with us for a very long time."
Mr. Iger pointed out that the 2004-2005 season's successful television slate had led to bookings from 20 new advertisers and higher rates for the fall lineup. The executive added that he has high hopes for the company's Disney and ESPN mobile service offerings, saying that while Disney may incur losses for the cell-phone entertainment services in the coming years, "we believe they will create real value over the long run."
Consumers in recent months have been less kind to Disney's studio-entertainment unit, which is struggling with a box-office downturn and slackening shelf lives for new DVD titles. Operating income in the film division fell during the third quarter to a loss of $34 million.
While Disney executives described themselves as optimistic about the movie slate for later this year -- which includes titles like the computer-animated "Chicken Little" and the much-anticipated holiday film "The Chronicles of Narnia: The Lion, the Witch, and the Wardrobe" -- they acknowledged that the movie business is being plagued these days by competition from other entertainment sources, like video games, and bogged down by fat marketing budgets that have contracted profit margins.
They added that like other studios, they are grappling with the shortening time periods during which consumers want to buy DVDs. Whereas in the past a title might have enjoyed a shelf life of several months in stores, most titles sell within the first month or not at all, they said. To cope with the behavioral shift, "we have to look at window changes…across the board," said Mr. Iger, adding that the oft-discussed notion of releasing movies simultaneously on video and in theaters is now "not out of the question."
Disney's parks and resorts division provided another bright spot during the third quarter. Operating profit there increased 6% to $448 million, helped by increases in attendance at various sites and a growing desire by visitors to spend more than one day at a time there.
Write to Kate Kelly at kate.kelly@wsj.com
As ABC Ratings Improve
By KATE KELLY
Staff Reporter of THE WALL STREET JOURNAL
August 9, 2005 6:40 p.m.
Buoyed largely by the strength of its television division, Walt Disney Co. posted a 41% increase in profit for its fiscal third quarter, extending a hot streak for the entertainment giant that began in 2004.
For the quarter ended July 2, the Burbank, Calif. entertainment company reported net income of $851 million, or 41 cents a share, as revenue rose 3% to $7.72 billion. That compares with a year-earlier profit of $604 million, or 29 cents a share, on revenue of $7.47 billion.
The results beat earnings expectations from analysts at Thomson First Call, who had predicted a 38 cent-per-share performance. Income growth "has been an ongoing theme at Disney for the past two years, and it is very gratifying to see it continue," said chief executive Michael Eisner in an investor call, his last before stepping down from that post on Sept. 30. He'll be succeeded by current president and chief operating officer Robert Iger.
Disney's upbeat earnings announcement came at the heels of another victory for the company: a Delaware judge's ruling that Disney's directors didn't breach their fiduciary duty in the 1996 termination of president Michael Ovitz. (See full story.)
After Mr. Ovitz's ouster, which came only 14 months into his tenure at Disney, company shareholders sued board members for more than $262 million in damages, claiming directors hadn't adequately overseen the hiring or firing of Mr. Ovitz, a onetime friend of Mr. Eisner. In yesterday's ruling by Chancery Court Chancellor William Chandler, the executives were chastised for not paying closer attention, but were not forced to pay any of the requested damages.
Disney's media-networks division, which houses the ABC television network and a bevy of pay-TV stations, including the ESPN sports network, was the main driver of the earnings growth. Fueled by prime-time hits like "Lost," "Grey's Anatomy," and "Desperate Housewives," operating income popped 48% to $998 million. Such successful programs "have brought millions of viewers back to ABC," said Mr. Eisner, "and we expect them to remain with us for a very long time."
Mr. Iger pointed out that the 2004-2005 season's successful television slate had led to bookings from 20 new advertisers and higher rates for the fall lineup. The executive added that he has high hopes for the company's Disney and ESPN mobile service offerings, saying that while Disney may incur losses for the cell-phone entertainment services in the coming years, "we believe they will create real value over the long run."
Consumers in recent months have been less kind to Disney's studio-entertainment unit, which is struggling with a box-office downturn and slackening shelf lives for new DVD titles. Operating income in the film division fell during the third quarter to a loss of $34 million.
While Disney executives described themselves as optimistic about the movie slate for later this year -- which includes titles like the computer-animated "Chicken Little" and the much-anticipated holiday film "The Chronicles of Narnia: The Lion, the Witch, and the Wardrobe" -- they acknowledged that the movie business is being plagued these days by competition from other entertainment sources, like video games, and bogged down by fat marketing budgets that have contracted profit margins.
They added that like other studios, they are grappling with the shortening time periods during which consumers want to buy DVDs. Whereas in the past a title might have enjoyed a shelf life of several months in stores, most titles sell within the first month or not at all, they said. To cope with the behavioral shift, "we have to look at window changes…across the board," said Mr. Iger, adding that the oft-discussed notion of releasing movies simultaneously on video and in theaters is now "not out of the question."
Disney's parks and resorts division provided another bright spot during the third quarter. Operating profit there increased 6% to $448 million, helped by increases in attendance at various sites and a growing desire by visitors to spend more than one day at a time there.
Write to Kate Kelly at kate.kelly@wsj.com