Disney Movie Unit Drives Strong Results in Quarter

The Walt Disney Company appears to be having some success in repairing its movie operation, but now its television business is springing a leak.

Disney, reporting results for its fiscal second quarter, said that operating income at its movie studio shot up to $223 million from $13 million in the year-ago period. The release of “Alice in Wonderland” on March 5 was the primary reason for the rebound.

In contrast, Disney’s normally high-flying TV operation had flat income of $1.3 billion on a 6 percent increase in revenue. The company’s cable channels, including ESPN, surged as usual with higher advertising revenue and subscriber fees offsetting increased costs. But ABC, where income decreased by 24 percent primarily because of drooping prime-time ratings, weighed sharply on results.

Growth at Disney’s television operation is normally robust, with income in the first quarter increasing by 11 percent over the previous year and the fourth quarter recording a 26 percent uptick.

ABC will unveil new programs to advertisers on Tuesday in New York, and Robert A. Iger, Disney’s chief executive, told analysts in a conference call that he remained hopeful that a turnaround was on the horizon.

“I’m confident in the team’s long-term track record,” he said, referring to ABC management. Mr. Iger added that he expected upfront ad sales for the fall season to be “very good.” He also said the network had recently completed a series of cost cuts in its news division.

For the three months ended April 3, Disney had net income of $953 million, or 48 cents a share, a 55 percent rise from $613 million a year earlier. Revenue rose 6 percent to $8.6 billion. The results beat analyst forecasts.

Disney’s consumer products division, where income soared 37 percent to $133 million, contributed to the strong overall results. The company said sales of “Toy Story” merchandise has been strong and Marvel, which Disney acquired in August for $4.3 billion, chipped in healthy publishing sales.

But the movie studio was the primary driver. “Alice in Wonderland” had $960 million in global ticket sales. During the quarter Disney also released “The Last Song,” an inexpensive Miley Cyrus vehicle that sold about $72 million in tickets worldwide. Aggressive cost cutting also buoyed the studio’s results.

Because movie operations work far in advance, Disney is now reaping rewards from pictures that were put into production by a management team that was jettisoned in the fall, after a fallow stretch at the box office. Disney’s new movie managers, however, deserve credit for the effective marketing and completion of these films. But it will not be clear for at least six months whether a true turnaround is at hand at the studio.

The financial health of Disney’s theme park division, closely watched as a barometer of consumer confidence, worsened slightly. The unit reported a 12 percent decline in income to $150 million. Revenue inched up 2 percent.

The drop was partly because of higher fuel costs and promotions at Disney Cruise Line. Also contributing were increased labor costs and a 6 percent decrease in attendance at Walt Disney World in Florida.

James A. Rasulo, Disney’s chief financial officer, said the attendance decline was caused partly by a decision to ease off deep discounting — something that had kept the parks full of visitors during the economic downturn but had also hurt margins.

“Consumers are still out there waiting for bargains,” Mr. Rasulo said in the conference call. But he added that “we are determined and confident we can take our pricing back to normalized levels.”


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