Earnings: Disney 2Q Profits Up 27 Percent; Network Revs Flat; Studio Revs Fall

The Walt Disney Co. (NYSE: DIS) posted net profit for FY07 2Q of $931 million, or 44 cents per share, compared with $733 million, or 37 cents per share, compared to the previous year. Revenue was up modestly to $8.07 billion from $8.03 billion a year ago. More to come. Earnings release (PDF) | Webcast

Update: Bob Iger, Disney’s president and CEO, discussed coming summer movies, including the third installment of the Pirates of The Caribbean series as well as other video offerings. Looking to the broadcast upfront next week, he noted that with seven of the top 20 shows for the 18-49 demo puts ABC on “solid ground.”

— For Disney’s digital media platforms, Iger said during the call: “We continue to view the broadband-enabled internet as an important entertainment medium, and our creative and technological investments in Disney, ESPN, ABC.com are designed with that premise in mind.” For ABC.com, specifically, since September, 92 million ad-supported episodes have been requested by viewers. On DisneyChannel.com, about 91 million episodes have been initiated in the course of the last year. The company has sold 23.7 million shows and 2 million movies have been sold via iTunes.

— Operating income at the cable networks climbed from $154 million to $963 million, an over five-fold increase, which was driven largely by growth at ESPN and, to a lesser extent, the international Disney Channels. With ESPN, aside from increased revenues from contracts related to programming commitments and ad sales, the company also said benefits were gained by switching ESPN’s mobile phone operations to a licensing model.

Technology Advancements Favor Content Providers: “There’s probably about 50 percent broadband household penetration right now in the U.S. and we see that growing significantly over the next five years. The way were’ going to take advantage of that is through a blend of direct-to-consumer sales or going through other aggregators, such as Comcast, Cox and online aggregators,” Iger said. While he feels that Disney.com is strong enough to generate significant sales, Iger said that it would be “selfish or narrow-minded” if the company didn’t avail itself of the traffic and customer relationships of other companies. “We’re looking for deals that allow us the flexibility to go directly to the consumer as well as through a third party. We’re not entering into any exclusive deals.”

Comfort With iTunes’ Pricing: One questioner said that Disney was one of the few studios providing new home video releases to iTunes. The claim was that other studios haven’t followed Disney’s lead because iTunes’ charges less than retail DVD prices. Iger was asked if he was satisfied with the current iTunes pricing. Iger responded that last year 2Q, Disney sold 60 million DVD units – about the same as this year’s 2Q. He added that the pricing Disney receives from selling movies on iTunes was the same as it derives from mass retail sales. “There are cost of goods that are factored out of the iTunes sale, which allows them to sell at a lower price. That’s their decision and it allows us to take revenue out that is equal to, in terms of a per-click sale, store sales. So, yes, we’re quite comfortable with iTunes.”

–Overall, media networks revenues – which includes cable and broadcast – were flat at $3.6 billion in FY07 2Q. Studio entertainment revenues fell 13 percent to $1.6 billion for the quarter.

Comments have been disabled for this post