Dear Fellow Employees,
Today, we announced our third quarter 2010 earnings and I’m pleased to report that we grew revenues substantially and improved profitability across the majority of our businesses during the period. Earnings per share for the quarter increased 31% to $0.67 from $0.51, in the prior year period, due in part to the strength of our movie studios and earlier recognition of previously deferred revenue at ESPN. Revenues increased by 16%.
Over the last five years, we’ve focused on building our creative capabilities and strengthening our portfolio of core brands. We’ve also aggressively sought growth opportunities, both on newly emerging platforms and in promising international markets while, at the same time, divesting non-core businesses.
Our focus on high-quality branded entertainment had a big impact on the results of our studio segment, which has delivered three of the top five global and the top three U.S. films so far this year – Disney’s Alice in Wonderland, Pixar’s Toy Story 3 and Marvel’s Iron Man 2. These films are both creatively and financially successful and have been leveraged across many of our businesses. Toy Story merchandise sales reached new heights as consumers responded to a fresh line of well-designed products available globally. This bodes well for Pixar’s next feature film, Cars 2, opening June 2011.
At Media Networks, ESPN had a fantastic quarter creatively and commercially. What ESPN did with – and for – the FIFA World Cup was nothing short of spectacular. The month-long event was a ratings, revenue and brand-building success while ESPN’s high-quality, multi-platform coverage significantly raised the World Cup’s U.S. profile. The NBA also delivered great results, with one of the most thrilling Finals in a long time. ESPN with ABC really rose to the occasion and the Finals were the most-viewed series in a decade.
Our other cable channels also performed well during the quarter. Disney Channel continues to command high ratings, with successful shows including Phineas and Ferb and Good Luck Charlie. The Channel has also continued to expand its international presence. And, ABC Family has been on an extraordinary run with millennial audience favorites like The Secret Life of the American Teenager and a new hit in Pretty Little Liars.
A few days ago, we announced that ABC Family’s Paul Lee would assume the role of president, ABC Entertainment Group. With six years at ABC Family, Paul is a proven leader, showing great commercial instincts and skill at developing distinctive shows that really put ABC Family on the map as an identifiable brand. We are pleased to have him in this important role.
At Parks and Resorts, earlier this summer we unveiled World of Color, an amazing new attraction that’s been bringing record crowds to Disney California Adventure. It shows once again that when our Imagineers blend smart storytelling, technological innovation and brilliant execution they create something truly special. World of Color is among the first of our next generation of attractions at California Adventure and its early success is a promising sign for our investments there.
Earlier this month, we acquired social network games company Playdom. We are all aware of the rapid growth of social networks and the huge popularity of the games available on them. In fact, a Nielsen study published last week shows that in the U.S. social gaming has overtaken personal email as the number two activity on the web…and we expect social gaming to grow at a compounded rate of more than 30% annually. Game playing on social networks is already a mainstream experience, attracting a broad, diverse customer base.
We feel it is essential for us to have a robust presence on social networks and to do so in the right way. In Playdom, we bought a successful company notable for its creative abilities and its potential to leverage our brands in this fast growing market that’s already engaged millions of consumers worldwide. Playdom brings us the talent, technical expertise and market know-how vital to rapid success in this space.
With the acquisition of Playdom and of Tapulous, a developer that specializes in mobile games and apps, we now have a diversified, multi-faceted games business capable of creating a wide range of experiences to meet evolving consumer interests
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We will remain in console games with Disney-branded titles. We’ll also devote resources to the creation of social games, mobile games and apps. Our successful virtual worlds like Club Penguin continue to grow domestically and internationally and we will continue to launch new ones, like the highly anticipated World of Cars, which debuts tomorrow. We believe that having this kind of breadth and depth of both development skills and product offerings is important to achieving real and lasting growth in the games arena.
As is the case with Pixar, Club Penguin and Marvel, the talented people at Playdom and Tapulous will benefit from access to our content, brands and financial resources while operating in an environment that led to their initial success.
In sum, our strong third quarter performance underscores the value of sticking to a smart strategy even in tough times, of investing in the right people, and of focusing relentlessly on quality and innovation to drive growth in shareholder value. I’m very proud of – and thankful for – the hard work that you do and what we’ve been able to accomplish and I’m really excited about where we are going.
Bob
