Increased spending by visitors at the Walt Disney Co.'s theme parks and continued growth at its ESPN and other cable networks helped the media giant overcome a disastrous quarter at the movies, where big-budget flops such as "The Alamo" dragged down studio operating income by 61 percent compared with last year.
Revenue for the third quarter ended June 30 was $7.5 billion, up 17 percent from the same period last year, while net income climbed 20 percent to $604 million (29 cents a share) from $502 million (24 cents).
Acknowledging in a conference call yesterday that "our studio ran through a bit of a cold streak at the box office in early 2004," Disney chief executive Michael D. Eisner said the company's quarterly numbers nonetheless are "further evidence that Disney's management team is delivering the solid performance planned."
Eisner and some Disney board members have been the target of a shareholder rebellion led by former board members Roy E. Disney and Stanley P. Gold, who charge that Eisner has presided over a 10-year slide in stock price while his salary and bonuses have gone up and ratings have dropped at ABC.
"The company is still riding the wave of DVD sales from last year's theatrical film successes . . . but considering the dismal box office performance this year and the lack of obvious growth throughout the company, 2005 will not be a growth year and, in fact, the party may be over," Roy Disney and Gold said in a statement after Disney's earnings were reported yesterday.
Yesterday's numbers represent the second straight quarter of growth since Comcast Corp. made an unsolicited takeover bid for Disney in February. For the first nine months of fiscal 2004 (Disney's fiscal year begins on Oct. 1), the company had $23.2 billion in revenue, up 16 percent from the same period last year, and earnings of $1.83 billion (88 cents), up from $852 million (42 cents).
Last year, Disney's studio set an all-time global box-office record of $3 billion in revenue with hits such as "Finding Nemo," "Pirates of the Caribbean: The Curse of the Black Pearl" and the remake of "Freaky Friday."
This year, "The Alamo," which cost nearly $140 million to make and market, has taken in only a little more than $24 million worldwide, according to Box Office Mojo, which operates a Web site that tracks box-office receipts based on studio information. Jackie Chan's "Around the World in 80 Days" cost $140 million to make and has brought in only $37 million. "Hidalgo," which cost more than $120 million and bombed domestically, may break even thanks to overseas revenue. It has made about $108 million so far.
Attendance at Walt Disney World in Florida was up 20 percent for the quarter, the company said, with the average guest spending 2 percent more this quarter than in the third quarter of 2003. At California's Disneyland resorts, average spending was up about 8 percent over last year, though attendance rose only 1 percent because the company decided not to engage in a price war with rival theme parks, which cut attendance costs, the executives said on yesterday's conference call. Besides, said Disney President Robert A. Iger, fewer customers could be a good thing.
"The level of quality for the guest is better when the park isn't crowded," he said.
The company's cable networks, led by ESPN, continued to surge, with a 31 percent quarterly gain in operating income compared with last year. The company's broadcast division, which includes the fourth-place ABC network, is still slumping, showing a 21 percent drop in operating income compared with the third quarter of 2003.
Iger said that spending on political advertising at Disney's 10 ABC television stations was up 4 percent for the third quarter of 2003 compared with the same period last year; typically, political ad spending drives up television station revenue by about 10 percent in election years.
But Iger said that only ABC stations in swing states such as Pennsylvania and throughout the Midwest are seeing significant political ad spending; ABC stations in New York, Los Angeles and San Francisco are not. Also, the small number of competitive senatorial races is hurting station ad revenue, he said.
"There's not a real election in Illinois," for example, Iger said, referring to last week's GOP drafting of Alan Keyes to run against Democrat Barack Obama.
Disney stock closed up 50 cents yesterday at $22.44 per share. The stock is down from its 2004 high of more than $28 per share, reached in February.