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EXCLUSIVE: Can Disney Magic Defeat Recession?

Thursday, 6 Nov 2008 | 7:10 PM ET

Ahead of earnings Thursday, investors sold off shares of Disney . Concerns mounted throughout the day that even pixie dust couldn’t protect the company from its worst foe, the economy.

And they were right. Walt Disney reported earnings of 40 cents a share for the third quarter, missing analyst estimates. A struggling economy, lower box office returns and a loss associated with Lehman Brothers all hurt the entertainment giant.

Can that old Disney magic sustain stockholders through a prolonged economic downturn? We found out about some of the tricks CEO Bob Iger has up his sleeve.

Disney CEO on the Selloff
Disney CEO Robert Iger discusses the market selloff and his consumer outlook with the Fast Money traders.

Theme Parks

Disney's theme parks showed a 7 percent increase in revenue during the quarter, helped by higher guest spending. But operating profit at the unit fell 4 percent due to higher labor costs at Walt Disney World and increased fuel costs at the Disney Cruise Line.

CEO Bob Iger tells us, “At our theme parks our attendance has been relatively fine. We’re down about 1% year over year. And our bookings for the Holidays are down only 1%.. But if you look at our long term bookings they’re off appreciably from a year ago.”

However they company is implementing new marketing strategies to attract more visitors and Iger tells us, “We’re offering consumers a value proposition. Buy 4 days of theme park tickets and and get 3 free.” It's a similar initiative to what Disney did in late 2001 which Iger says was "very successful."

Advertising

“We’re seeing softness across numerous sectors notably automotive manufacturing and that hurts us at the network, at ESPN and at our TV stations,” Iger tells us.

He feels the only advertising strategy in a marketplace as weak as this is to put out a great product and then the viewers will come. Once they do, advertisers will follow.

And when we asked Iger how long he thought the downturn might be he told us, “I have no prediction about how long the downturn will be. But the downturn seemed faster to me than any falloff in advertising that I remember."

"It happened first at the local stations and then at cable and then network. In the last 4 weeks we saw a significant change in the marketplace and I don’t ever remember that happening before so quickly.”

But like many Disney movies, Iger is counting on a happy ending. He tells us if any company can weather a storm it's Disney. And he's very excited about the prospects of their next film, "Bolt".

Clearly Iger is a strong believe in the power of the Disney brand. And maybe there really is some magic going on in Cinderella's Castle.

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Trader disclosure: On Nov. 6, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (DIS), (BNI), (MSFT), (SDS), (UUP), (WMT); Finerman's Firm Owns (MSFT); Finerman's Firm Owns (OIH) Puts; Finerman's Firm Is Short (IYR), (IJR), (MDY), (IWM), (SPY), (USO), (USO); Najarian Owns (MBI) Put Spread; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (YHOO) And Is Short (YHOO) Calls; Seymour Owns (AAPL), (BAC), (EEM), (F), (MER); Seygem Asset Management Owns (EEV)

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