Disney beat Wall Street expectations, posting higher-than-expected revenue and earnings on strength at its media networks and a turnaround at its movie studio. The mouse house's fiscal third quarter earnings grew to 67 cents per share, up from 52 cents per share a year ago, while revenue grew 16 percent to $10 billion. CEO Bob Iger told analysts on the earnings call that the company "aggressively sought growth opportunities in emerging platforms and International markets, while divesting non-core businesses." (He's referring to the acquisition of Playdom and Tapulous and the planned sale of Miramax.)
Disney's real stars are its cable channels and ESPN in particular, which drove media networks' revenues up 19 percent and operating income 43 percent higher. On the earnings call CFO Jay Rasulo said the ad market is "quite strong" though visibility remains quite limited. Ad sales at ESPN and its TV stations are up by double digits. The TV stations, which struggled during the economic downturn, posted 32 percent ad revenue gains, led by auto ads, as well as other categories.
The NBA Finals and the World Cup drove ESPN ad revenues 31 percent higher, but even with exclusive special events like the World Cup, ad revenue grew 17 percent. A sign of ESPN's multi-platform growth: a quarter of its World Cup revenue came from what they call 'non-linear' platforms -- ESPN3, ESPN Mobile TV, ESPN.com and Radio. This quarter ESPN recognized previously deferred revenues from annual programming commitments earlier than expected, on strong ratings for NBA finals and the World Cup.
The big question: How's the phasing out of theme park discounts affecting attendance? Revenues at the parks and resorts grew 3 percent while operating income dropped 8%-- a sign of slightly lower attendance and higher guest spending. On the call Disney explained that when adjusting for the calendar shift this year, combined attendance at the parks dropped just 1 percent. (That's less than the 5 percent decline JP Morgan's Imran Khan and others projected). Per-room spending at the domestic parks grew 4 percent. Iger didn't answer questions about what it'll take for Disney to grow margins, but said that the fact that bookings are down just 1 percent is a positive thing, and that visibility is still limited.