Disney's fourth quarter top and bottom line results beat Wall Street analyst expectations. Net income grew 18 percent on four percent higher revenue, despite some tough comparisons with last year's summer quarter, when the economic downturn had yet to fully hit the theme parks. Right after Disney's earnings call I sat down with CEO Bob Iger to hear about what's driving the company's growth and what's holding it back.
There's no question that the media networks, which includes all of the TV businesses, is driving the company's growth.
Operating income for the division grew 26 percent in the quarter, despite lower ratings and ad rates at the broadcast network.
Iger says he sees national advertising returning, though visibility is limited, and he doesn't see local ads coming back. But Iger isn't bogged down in the ad markets. He sees growth from Disney's content from other revenue streams, like international sales and digital distribution revenues. Iger admitted that the TV channel alone is challenged, but together with the content studio, it's a great value proposition.
Iger didn't hold back when it comes to the movie studio, blaming the disappointing results on bad content, plus a challenging market for DVDs. This kind of finger pointing is certainly easier now that he has shaken up studio management. So what does this new team need to do? First, they need to improve Disney's live-action movie slate, and figure out what the consumer really wants. The industry is facing more competition than ever, and pressure on the DVD business, so Iger says that cost control and strategic marketing is key.
While the theme parks have been suffering from the economic downturn and pullback in consumer spending, Iger points out that discounting strategies have kept attendance high. It's not just about keeping the parks hopping; he says this also brings in new visitors who probably wouldn't have gone to the parks at a higher price point. Iger is confident that now that people are introduced to Disney, they'll keep coming back. Now he's looking to China, and a park in the works in Shanghai, as a big driver of growth. He pointed out that 300 million people live within a two-hour drive of the park Disney's planning.
I couldn't help but ask what the potential NBC Universal-Comcast deal would mean for Disney — would it change their strategy?
Iger said that Comcast's interest in NBC Universal places a high value on content, which is Disney's focus, and therefore is good for Disney. He said it doesn't affect Disney's acquisition strategy. And when asked if a merger of Comcast's Versus sports channel and NBC Sports could be a threat to ESPN he shrugged, saying that ESPN has, and will continue to face plenty of competition. Disney was the last media giant Comcast went after, to which Iger says "operating as an independent entity has been just fine for our shareholders and that’s what it's all about for us."
I also asked Iger about the major management changes he's made at the company in quite a brief period of time. Yesterday Disney also announced that its CFO Tom Staggs and Theme Parks Chairman Jay Rasulo are swapping jobs. And just last month Iger appointed a new studio chief, Rich Ross, who comes from cable, with effectively no movie studio experience. Iger says this is all part of a plan to give day after the announcement that Disney's recently-appointed studio chief, Rich Ross, is restructuring the studio. Iger says this is all part of his plan to grow executive talent by giving them new opportunities in different areas, while bringing their expertise to new parts of the company. Iger punted on my questions about whether this was creating a succession plan, saying that the long term plan for Disney is to strengthen its management ranks.
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