The Walt Disney Co. on Thursday reported a quarterly profit that more than doubled year-over-year as plunder from Pirates of the Caribbean: Dead Man's Chest kept sailing in. The worldwide blockbuster helped Disney's studio entertainment division dominate in terms of revenue growth, followed by media networks, consumer products and parks and resorts.
The company earned $782 million in its fiscal fourth quarter, compared with $379 million a year ago. Revenue grew 14% to $8.8 billion.
Although the company beat Wall Street estimates on both metrics, encouraging one analyst to call the results "stellar," shares of Disney fell 2.1% in after-hours trading.
During the regular session, before results were released, Disney shares rose to a 52-week high of $33.58, which flirts with the stock's five-year high.
"Our positive view of Disney is reinforced by these results and trends," Goldman Sachs analyst Anthony Noto said.
Disney's studio, which four months ago slashed jobs, costs and movie output, posted a 33% rise in revenue to $2 billion. The unit showed operating income of $214 million, reversing last year's negative $313 million.
For the fiscal year, studio revenue fell 1% to $7.53 billion, but operating income soared 252% to $729 million, in part because of fewer domestic releases from Miramax.
Home entertainment results improved through lower marketing and distribution costs, even as the company sold fewer units. Standouts this year included The Chronicles of Narnia: The Lion, the Witch and the Wardrobe, the Cinderella Platinum Edition and Chicken Little. Last year's crop included The Incredibles, National Treasure and the Aladdin Platinum Edition.
Media Networks turned in a 10% revenue improvement to $3.7 billion and an 18% rise in operating income to $883 million. Cable, driven by ESPN, turned in a 16% revenue rise, while broadcasting clocked in with a 1% gain.
Disney singled out strong Touchstone sales because of higher international syndication revenue and DVD unit sales of Lost, Grey's Anatomy and Desperate Housewives as well as higher license fees for Scrubs.
During a conference call with analysts, Disney executives guided for continued double-digit growth for ESPN and touted the company's opportunities in digital media, video games and even music.
"We think we have created a very interesting formula to be successful in music. It's Disney-branded," Disney president and CEO Robert Iger said.
Currently, less than 10% of the growth of the studio is represented by the growth in music, leaving lots of room for improvement, chief financial officer Tom Staggs said.
"There's also a great synergy when it comes to music between the Disney Channel, Disney.com, Radio Disney and the Disney phone," Iger said. "And there will be very, very robust music offerings that, in effect, tie into one another across all those platforms."
The CEO also said Disney might be on the lookout for more low-cost acquisitions in the video game arena, but it would not be interested in buying anything too big.
"Our goal is to ultimately end up with a significant games business," he said.
He raved about Disney's efforts at selling movies and TV shows on the Internet and seemed especially bullish on the advertising model.
"We're expecting growth to come from multiple directions: from downloads and streams, from advertiser-supported experiences to purchases," he said.
Iger said ABC has seen 19 million requests for streams since May, and advertisers are paying up to reach the demographic, which skews younger and wealthier compared with the audience that watches the same shows on TV.
Recall rates "are tremendous," he said, citing a May experiment that showed that more than 85% of those who watched the streams remembered the advertiser.
He acknowledged that large DVD retailers had a problem with Disney offering movies through digital download, but said he intends to participate with the retailers' own initiatives in that regard when they launch their services.
"Clearly, the digital download initiatives, particularly movies, created some tension over issues like pricing and windowing," he said. "But we ultimately believe the tension is going to dissipate over time as we learn more about how the business is impacting the consumer."
Staggs also said the sale of Disney's ABC radio assets to Citadel Broadcasting Corp. will close in the first half of next year, though he also said that modifications might be in store to assist Citadel with financing.
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