Disney (NYSE: DIS) CEO Bob Iger used the corporately correct equivalent of ‘take the needle out of your arm’ when an analyst on today’s earnings call expressed dismay that the Disney Interactive Media Group wasn’t close to break even yet: “We didn’t specify that we’d get toward break even. I think we talked at the investor conference about profitability in 2013. It’s a work in progress.” That’s right, 2013.
Iger went further in that response to Michael Nathanson, who asked, “We had assumed interactive would start getting towards break even. I wonder, this quarter for the rest of the year will we see improvements over the Playdom charges in profitability.”
One reason that won’t be the case was Disney’s decision after the Playdom acquisition and its addition of Playdom CEO John Pleasants as the top gaming exec, now co-president. Dissatisfied with the quality of the games it was turning out, DIMG shut down the release stream for five months to improve that. One result from the restart: a top 10 game on Facebook called Gardens of Time that Iger said is “monetizing very well.” That speaks to one of Disney’s primary goals with its games now — making games that are more monetizable.
As for the non-gaming side, Iger mentioned the planned relaunch of Disney.com in coming months. He expects a better experience that is more attractive to advertisers as well as users but made no predictions about profitability.
About that $34 million : Some nerves were a little frayed by the sudden appearance of a $34 million paydown for Playdom. Pushed on the subject by Rich Greenfield, Iger and CFO Jay Resulo said the same charge was included last quarter — and will be until the half-billion-dollar purchase is paid off. The difference this time is the company shone a spotlight on the payment, listing it among a batch of debits that costs Disney $170 million last quarter and kept it from making estimates. Why not specify it last quarter? Because Disney beat the Street and didn’t need to.
Highlighting it this quarter may help people understand last quarter’s overall results and it definitely can be factored in from here out. It didn’t help DIMG at all. Instead it raised more questions about the games segment and its viability. Greenfield bluntly asked Iger: “Why does Disney need to be in this business? Why is this so important to you?” The reply was a lot less direct.
Iger gave a quick runthrough of Disney’s strategy of blending licensing and development, original concepts and derivative from other Disney media, and he was blunt about the failure to find the right console strategy. The Playdom acquisition is Disney’s way of trying for a different outcome in social gaming. Iger blames some of the console progblems on Disney’s late entry as a developer. With social gaming, “we believe we have the opportunity to leverage current IP and new IP in a space we think is still in its infancy.” Playdom is a “smart bet.” The same would be true for mobile, Iger added.
The ultimate answer: “We just feel that controlling our destiny and making some smart bets … is the right thing for us to do.”
My question: Will Iger and Disney give DIMG until 2013 to prove it?