HK Disneyland showed ‘decline’

HK Disneyland showed 'decline'   
Written by Dade Hayes and Patrick Frater     
Wednesday, 09 May 2007  

LOS ANGELES — Hong Kong Disneyland was identified Tuesday as a drag on the performance of Disney.

The U.S. conglomerate reported solid earnings for its fiscal second quarter ended March 31. Total revenue of $8.1 billion was up 1% from the year-ago level of $8 billion, and operating income rose 25% to $1.8 billion from $1.4 billion.

But it said that the Hong Kong theme park showed a "decline" that it did not quantify.

Overall the parks and resorts increased revenues by 9% to $2.4 billion and segment operating income increased 19% to $254 million. "Segment operating income growth reflected increases at Disneyland Resort Paris, Disneyland Resortand Walt Disney World, partially offset by a decline at Hong Kong Disneyland," company said in its earnings report.

Disney chief financial officer Tom Staggs said Hong Kong Disneyland, which opened in the fall of 2005, continues to fall short of expectations and Disney is planning new marketing campaigns.

“We view Hong Kong as a valuable asset,” Staggs told analysts during a conference call.

Studio revenues dropped 13% to $1.55 billion on tough comparisons with the prior year's strong roster, including international bows of "The Chronicles of Narnia" and "Chicken Little." But having fewer mega-releases, combined with recent cost-cutting initiatives, helped minimize expenses and drove the studio's operating income up 60% to $235 million.

While it accounts for just one-fifth of overall revenues, the Disney studio division is closely tracked by Wall Street. The net effect of the Pixar deal, for example, will be weighed by some in the B.O. of June release "Ratatouille." And the recent refocusing on franchise building will come into play with "Pirates of the Caribbean: At World's End" over Memorial Day.

In a conference call with analysts, CEO Robert Iger reported having seen "Pirates 3," which he called "simply great." He also touted "Ratatouille" as "the most gorgeous animated movie I have ever seen."

He declined to take one analyst's bait and forecast an opening weekend for the "Pirates" sequel, but he said record tallies for "Spider-Man 3" show that "moviegoers are excited to be going back to big movies and sequels to movies they've loved before."

As for the so-so B.O. generated by "Meet the Robinsons" during the quarter ($92 million thus far in the U.S.), he noted the toon was mostly finished before the Pixar acquisition closed. And while he insisted the integration of Pixar was progressing well, he said, "It won't be fair to judge" until the release of "American Dog" in 2008.

Elsewhere in the company, TV networks helped pace the overall performance. The cable group's operating income increased 19% to $963 million for the quarter, mainly on growth at ESPN and at overseas Disney Channels, which are now seen in 127 countries and expanding local production activities.

Stateside and overseas syndie sales of shows such as "Desperate Housewives," "Lost," "Grey's Anatomy" and newer fare, as well as ad rates for primetime shows, posted "double-digit" growth, according to Staggs.

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