Disney 3rd quarter profit falls 26 percent due to tough global economy

Disney 3Q profit falls 26 pct, cites tough economy

LOS ANGELES — The Walt Disney Co. said Thursday its fiscal third-quarter profit fell 26 percent as slower DVD sales pushed its movie studio into the red while the weakening market for TV ads stabilized.

Hurt by the tough global economy, net income for the family entertainment company, which owns Disney theme parks, TV networks ABC and ESPN and the Pixar animation house, sank in the three months ending June 27 to $954 million, or 51 cents per share. That’s down from $1.28 billion, or 66 cents per share, in the same period a year ago.

Revenue fell 7 percent to $8.60 billion, from $9.24 billion, a year ago.

After excluding a restructuring and impairment charge of a penny per share, adjusted income was 52 cents per share.

That squeaked by analyst expectations of 51 cents per share of earnings, but the revenue figure was below estimates of $8.83 billion, according to Thomson Reuters.

“We do see signs of economic stabilization, but the pace and strength of recovery remain uncertain and we are managing accordingly,” Chief Executive Robert Iger said on a conference call.

Revenue from ABC and ESPN fell 2 percent to $3.96 billion, driven by lower advertising revenue at ESPN. The company said its owned and operated local ABC affiliates saw an ad revenue decline of 26 percent, while the ABC network’s ad revenue was down in the mid-single digits.

Revenue at ESPN was down by nearly 10 percent, although the company expects some of the lost revenue — about $37 million in deferred fees from cable and satellite affiliates — will be booked in the current quarter.

Iger said advertisers are holding back on buying TV spots until close to the air date — and that the company would catch up on lost revenue soon.

“A lot of what ESPN is out selling is football and that commences in a relatively short period of time,” Iger said.

Parks and resorts revenue fell 9 percent to $2.75 billion as guests spent less, but Chief Financial Officer Tom Staggs said in a conference call with journalists that the company was “pleased with the attendance overall.”

Domestic parks attendance actually rose 3 percent, but discounts, including its “Buy Four, Get Three Free” and free dining promotions, cut into revenues. Some promotions are set to continue through December. When asked how much longer the discounts would be offered, Staggs said “we’re going to take our cue from the economy.”

Movie studio revenue fell 12 percent to $1.26 billion as this year’s home video slate, including “Bedtime Stories,” ”Confessions of a Shopaholic” and “Bolt,” didn’t compare well to last year’s releases, which included “National Treasure: Book of Secrets” and “Enchanted.” The studio posted a $12 million operating loss, down from a $97 million operating profit last year.

It expects to book higher profits in the future on the success of the Pixar movie “Up,” ”The Proposal,” and “G-Force,” which debuted at No. 1 at the domestic box office last weekend.

Iger shrugged off a question about competitor studio Sony Pictures recently cutting a distribution deal with $1-per-day rental kiosk firm Redbox, a subsidiary of Coinstar Inc.

He called kiosk rentals a “relatively small” part of the home video business, in which DVD sales still dominate, and said Disney made a deal to supply kiosk rental machines including Redbox’s several years ago.

“It underscores our strategy to make films that people are not only more likely to own than rent, but are better off owning versus renting,” Iger said. “If you want to watch a Pixar film, or you want your kids to watch it 50 times … then owning it is a lot more convenient and more valuable than renting it.”

Consumer products revenue fell 10 percent to $510 million.

Analyst Anthony DiClemente of Barclays Capital said the results were “modestly better than I expected,” and noted the ESPN affiliate fee revenue grew when excluding the effect of the deferred fees. He also responded favorably to Disney saying that it planned to resume buying back its shares soon.

Shares fell 93 cents, or 3.6 percent, to $25.29 in extended trading Thursday. Before the release of results, shares closed up 33 cents, or 1.3 percent, at $26.22.