After posting a solid quarter, Disney CEO Robert Iger described the company as holding a “strong hand in a very tough game.” The tough game is the weak economy that everyone is now talking about. Other than that, Iger talked up factors which included WALL-E and a nice matchup in the NBA finals (Boston vs. LA).
— Advertising: Delving into the numbers CFO Tom Staggs admitted that advertising has weakened, especially in the last couple weeks. This is most pronounced at the domestic broadcast stations, and to a lesser extent ESPN (NYSE: DIS). Auto advertisers are pulling back the hardest. Advertising at the ESPN unit was up in the low double digits in the quarter. Scatter market prices remain strong, above upfront pricing. As for the aforementioned basketball final: “The success of the NBA in the quarter was a benefit, but not a huge benefit.” The hope is that the final can help future pricing for NBA sales, but in this quarter it didn’t have much of an effect. Overall, advertising is less than 20 percent of total revenue, so the company isn’t as exposed as its peers, noted Iger.
— Content vs. Distribution: Is there a conflict with shareholder and boardmember Steve Jobs, given his interest in capturing profits on the distribution end? Iger: “The decision that the Walt Disney company makes (how to distribute)… are made solely by the management of the Walt Disney Company.” Digital distribution is additive: “Since we’ve decided to put movies on the iTunes platform, we’ve sold 5 million movies… which we believe is largely incremental to the aftermarket.” Focusing on margins is not the only thing you should focus on… “You see that at ABC, where access to programs has never been greater, therefor consumption is greater. While I admit that monetization against basically specific consumption is still an open question… I actually think that we’ve been driving incremental revenue.”
More after the jump.
— Gaming: Gaming profits were down in the quarter, since the Prince Caspian game couldn’t match last year’s Pirates of the Caribbean game. But, videogames are still viewed as a growth area, and there are no plans to dial back on investment. Eventually, annual development spend is likely to be in the $350 million range, compared to the $200 million range where it is now.
— Music Business: Won’t break out results, but it’s been good. Miley Cyrus sold 371,000 albums last week, making it the top in the US.
— Labor Relations: Iger explained that after coming up with deals with other unions, SAG was offered similar new media terms as everyone else. “SAG did not see fit to accept those terms, particularly on the new media side… we find it difficult to profer or offer to SAG terms that are different than what the other guilds agreed to,b>so the negotiation basically ended a couple of weeks ago, and to my knowledge there hasn’t been any progress, or even attempts at progress, sicne then.” No prediction on where things will go. Not having a damaging impact on business, as Disney continues to move forward on projects. A work stoppage isn’t likely imminent, but ultimately you can’t predict what the guild will do.
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