Despite 'Up' and other movie hits, Disney revenue drops, net income sinks
The conglomerate's revenue fell 7% to $8.6 billion. The drop was in line with competitor Time Warner Inc. and smaller than that of Viacom Inc. Another Disney rival, News Corp., hasn't yet reported earnings for the quarter that ended June 30.
Revenue at Walt Disney Studios fell 12% despite stronger theatrical revenue from hits like "Hannah Montana" and "Up." While the studio racked up marketing expenses to promote the movies in this quarter, it will reap more of the benefits from those hits, along with "The Proposal," later in the year.
"The content cycle has started to improve, however, and generally we believe the worst is over for the Disney studios," wrote Anthony J. DiClemente, media analyst for Barclays Capital.
The studio lost $12 million for the quarter, compared to a $97-million operating profit in 2008.
Disney's television networks, usually a bright spot for the company, experienced a 2% drop in revenue as even stalwart ESPN saw advertising income decline. Broadcaster ABC took the biggest hit, however, as higher programming costs and falling ad revenue drove down its operating income 34% to $204 million. Operating income for Disney's cable networks was $1.1 billion, down 8%.
Parks and resorts saw a 9% decline in revenue and 19% decline in operating income as guests at Disney World and Disneyland spent less because of the economic downturn.
Second-quarter margins for the parks were squeezed by aggressive promotions to keep visitors traveling to Disney's domestic parks, including discounted hotel rates at the Walt Disney World in Orlando, Fla. These promotions largely propped up attendance, which slipped a modest 1% in Orlando, and grew by 2% at the Disneyland Resort in Anaheim.
Travel to Orlando, which is a loose proxy for attendance at Walt Disney World, has showed signs of stabilizing since June, DiClemente wrote in a July 30 report.
Disney's interactive media division, which oversees online content and video games, had the steepest drop in revenue at 20%. But it narrowed from a $91-million operating loss last year to a $75-million loss because of reduced marketing and product development costs for games.
Consumer products revenue fell 10% as sales declined at Disney Stores.
-- Ben Fritz and Dawn C. Chmielewski
Photo: Revenue at Walt Disney Studios fell 12% despite stronger theatrical revenue from hits like "Up," which hit movie theaters at the end of May. Credit: Disney / Pixar.