Recession smacks Disney profits; movie division results off 97%

 

The Walt Disney Co. reported a decline in second-quarter profits, as the recession dragged down the company's theme park, movie and television businesses.

The company reported a 46% drop in net income to $613 million, on revenue of $8 billion. Diluted earnings per share for the quarter were 33 cents a share, including restructuring and impairment charges which had a 10 cent per share impact on earnings.

"This was a difficult second quarter due to the weak economy and other factors," Disney President and Chief Executive Robert A. Iger said in a statement.

Disney's theme parks are feeling the brunt of the slow economy and people's reluctance to take vacations because of job insecurity. Operating income was off 50% to $171 million, from $339 million a year earlier. The drop reflected reduced guest spending at Walt Disney World in Orlando, Fla., and the Disneyland Resort in Anaheim, reflecting the discounting in hotel rates and ticket promotions needed to keep visitors coming to the parks.

The movie studio's operating income fell 97% to $13 million because of weak box office sales for "Confessions of a Shopaholic" and "Jonas Brothers: The 3D Concert Experience." DVD sales were also lower.

Disney's television business, particularly its ABC network, was also down. The network reported a 4% drop in operating income to $1.3 billion. Operating income for the broadcast business was down 38% to $162 million for the quarter, because of  the weak economy eroding ad sales at the same time that production cost rose.

By contrast, Disney's cable networks -- ESPN, ABC Family and Disney Channel -- reported a gain of 5%.

--Dawn C. Chmielewski

Photo: Disney Chief Executive Robert Iger. Credit: Fred Prouser / Reuters

Comments

[JT7335]

Wow. Do you think MAYBE now Disney can admit that hiring brilliant MBAs wasn't the best idea? Let's see ... let's lower the average price on our tickets, let's raise the price of merchandising, and let's reduce the quality of the in-park experience and see what happens. HEY! They're not spending as much! They're not coming as often! And those who do view it as a "free trip" since they bought a low-price annual pass!

It wasn't TOO long ago that the way it worked at Disney theme parks was this: There was a price for admission. You paid it. You got in. You enjoyed it. And next time you went, you paid it again. Now, you can finance an annual pass, you can get 100 visits for the price of one, you can get discounts up the ying-yang ... and because of that, why bother to eat or buy stuff in the parks? It's just a cheap, easy entertainment option.

Disney has cheapened the park experience. It will be VERY interesting to see if they can get out of this problem long-term. Ah, those MBA schools ... everything they teach looks SO GOOD on paper and in theory!