Interview: Tom Staggs, CFO, Disney: $930M Digital Revs ‘Slightly Less’ Than Hoped, ‘Still Pleased’

imageGiven the economic climate, the primary focus in today’s *Disney* earnings call — particularly in the Q&A — was on the company’s parks & resorts business. But after the call, CFO Thomas Staggs agreed to provide some insight into Disney’s digital media efforts, which came close to producing a billion dollars in revenue for the company this year. The number stopped short around $930 million. Staggs said it was “slightly less than we might have hoped coming into the year, and the difference was mostly on the advertising side. Overall, I’m still pleased.”

Digital revenues: “We continue to see digital revenues increase. We were up a nice double-digit percent last year. Digital revenues came in across the company — but not including the value of the packages we sell for the theme parks — right in the neighborhood of $930 million in revenue across internet advertising, paid content, digital downloads, that sort of thing. We had been actually seeing a little bit of a slowdown that corresponded with the slowdown in other ad markets so the internet hasn’t been immune to that at all.” But he said Disney (NYSE: DIS) hasn’t seen much change in the pace of digital downloads “so the underlying business, I think, is still continuing along that path that we hoped it would.”

More after the jump

Breaking out digital: Staggs points out that digital media revenues exist in different places in the company — is reported with ESPN as part of cable, with the network in broadcasting, and, through this release, the Disney Interactive Media Group in broadcasting as well. (The group was formed by the recent integration of the Walt Disney Internet Group with Disney Interactive Studios.) That’s probably going to change for FY09, he said, with DIMG being reported on its own. “As you might expect, between video games … and Disney Online, that’s a business we’re very much in investment mode on so there are meaningful losses currently as we invest in that business.” And, he said, they intend to continue investing. For example, as he said in the earnings call, Disney will increase its investment in the traditional video-game business by $75 million to $100 million in FY09, over and above the $170 million spent in 2008. “To be clear, that’s the investment in research and development.” The video-games business itself through 2008 was right around break even, he added.

Club Penguin: Disney acquired the kids’ virtual world last year for $350 million in cash and a possible earn out of $350 million. Is it performing as expected? “Club Penguin actually is doing quite well for us.” Disney recently launched a CP consumer products line on a limited scale. “It’s not launched broadly yet, so this is anecdotal, but it’s really a fairly hot property right now where we’ve launched it so we’re looking to see if we can roll it out more broadly.” In terms of the subscriber growth, “we’re not overwhelmed but we’re pleased.” CP also just launched its first non-English-speaking site in Brazil. “I think that bodes well for the future so I think there’s real growth potential for Club Penguin and the rest of the work we’re doing in virtual worlds.”

Online advertising: On CNBC this afternoon, CEO Bob Iger said this was faster than any downturn or falloff in advertising he’d seen in 30 years, that it showed up first in local TV, then cable, then networks. Asked about online advertising in that context, Staggs said: “Online advertising actually started to soften a little bit earlier than some of the other media outlets; not quite as early as local but not long thereafter.. … It hasn


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