Disney Sees Improvement in Parks, Film

Walt Disney sees improved margins at its theme parks and better profitability at its film division in fiscal 2007, its chief financial officer said.

Disney shares hit a new 52-week high in Tuesday trading, rising more than 2%.

"We feel very good about how our business is positioned," CFO Tom Staggs told a Credit Suisse analyst conference in New York. "I think you are going to see improvement in margins in theme parks ... (and) continued improvement in profitability in (Walt Disney) Studios.

He also said the company, whose fiscal year started Oct. 1, expects the "Cars" DVD to sell as well as its mega-hit "The Incredibles." The latter animated film, released in 2005, has sold 16 million to 17 million DVD units domestically, a Disney spokesman said.

The "Cars" DVD sales were expected to drive retail sales of "Cars" merchandise to the same levels in fiscal 2007 as in the prior fiscal year, or about $1 billion, of which Disney gets royalties, Staggs said.

"That's a pretty strong result," he said.

Invest in Theme Parks

The company was planning to invest "a little more" in its theme parks in fiscal 2007 than last year, especially around attractions derived from its Pixar animated films, he said.

While its theme parks face tough comparisons to takings during last year's 50th anniversary promotions and Disney would not make short-term predictions, Staggs said "customers are looking pretty resilient from the data we have seen."

For its television business, Disney's ABC network sees advance sales for its prime-time advertising rising in the mid-single digit percentages from last year, he said.

The media networks division was also benefiting from a strong performance in both viewership and advertising sales from ESPN's Monday Night Football.

Expansion in Video Games

As for newer media strategies, Staggs said Disney would raise its investment in video games to $350 million per year in the next five years from last year's $100 million.

Disney, which in September began selling movie downloads via Apple Computer's iTunes store, expects to reap $25 million for the first year of the offering.

Staggs warned analysts to keep that growing revenue stream in perspective, pointing out that it compares to company expectations of $3 billion in DVD revenue in fiscal 2007.

While the overall DVD market was expected to be "flattish" in fiscal 2007, Disney was seeing strength in DVD sales for its animated films, including the newly re-released "The Little Mermaid," Staggs said.

The company expects to post total digital revenue from downloads and online advertising and retail sales, not including travel, of about $700 million in 2007, Staggs said.