Disney CFO: parks looking better, ad sales down
Walt Disney Co Chief Financial Officer Tom Staggs said on Tuesday that hotel bookings at its theme parks have partially rebounded due to deep discounts at Walt Disney World, but TV ad sales face deepening pressures from the global economic woes.
Staggs provided a few more details about the mounting pressures on the entertainment conglomerate in the weeks since it reported a steeper-than-expected earnings decline, but he had little good news for investors.
“We are operating as if we are going to see this condition for some time. I’m not going to make any predictions but it doesn’t seem like it’s (going to improve) tomorrow,” Staggs told the UBS Global Media and Communications Conference.
Staggs said he and Disney Chief Executive Bob Iger planned no “sweeping” companywide cutbacks and were “pleased” with cost savings moves independently under way at the four businesses.
Staggs said domestic hotel bookings were down about 6 percent in Disney’s fiscal first and second quarters, an improvement over the 10 percent drop the company forecast for the same period on its Nov. 6 earnings conference call.
He attributed the bump in advance bookings, mainly coming in the second fiscal quarter, to discounts implemented the same day Disney announced the grim forecast for its theme parks.
“We are certainly pleased with the uptake there,” he said.
Park attendance was still running 4 percent behind last year’s first quarter, with international visitors counting as “the strongest segment,” Staggs said.
Near-capacity crowds during the holidays give Disney less flexibility to cut costs in the current quarter, but “we can do this as we move into the first part of the year,” Staggs said.
“We’ll tailor what we’re doing in our parks, in the labor force, to the demand that we see,” he said.
Staggs also provided more clarity about the company’s previous forecast for a drop in ad sales at its ESPN cable sports networks, saying that sales were running “high single digit percentages” behind last year in the current quarter.
At the company’s ABC broadcast network, prices for scatter, or spot, advertising were running 10 percent above upfront, or advance, sales prices but volume was low in the current quarter.
Scatter pricing was down over last year’s scatter prices, however, and the uptake of options for second-quarter advertising time were running “about 10 percentage points below where we would like to see them,” Staggs said.
ABC and its competitors had “a tough fall season” trying to regain ratings after the prolonged Hollywood Writers Guild strike halted new episodes and viewers migrated to cable news during the election and financial meltdown, Staggs said.
“We are optimistic and hopeful about midseason but it’s a tough marketplace from an ad perspective,” Staggs said.
Ad sales at the company’s owned-and-operated television stations were pacing “mid-teen percentages” below the prior year with the “softness more acute at local stations,” he said.
The company also faces tough comparisons and selective consumers in holiday DVD sales, where the weaker performing “Prince Caspian” and “Wall-E” must match up against last year’s blockbuster “Pirates of the Caribbean: At World’s End” and international Disney-Pixar hit “Ratatouille,” Staggs said.
“The DVD business is going to see some impact from the downturn. How much remains to be seen,” he said. “‘Wall-E’ is doing well but we’re not sure it will do the numbers that ‘Ratatouille’ did.”
The company plans to invest more in terms of capital expenditure in fiscal 2009 than it did the prior year, but will cut back on share buybacks to preserve capital until the credit market improves, Staggs said.