Disney profits dive

Bob Iger: 'Very significant' cost-cutting on the way

Disney reported weak quarterly earnings Tuesday, and CEO Bob Iger said "very significant" cost-cutting is in store for the company, which already has slashed hundreds of jobs.

Calling such money-saving measures a work in progress, Iger was purposely vague. "We're being very aggressive; we're very responsible," he told analysts during a conference call. "Maybe in due course we'll be a little more specific about the number."

Later, Iger said that "clearly there have been, and will be, reduction of personnel" but that cost-cutting "does not just involve eliminating jobs."

Consumer products and interactive media -- the latter is a newly broken-out category -- fared best in Disney's fiscal first quarter ending Dec. 27. Its film studio, plagued by dwindling DVD sales, was the laggard.

Iger, in fact, sounded particularly dour about the DVD industry, lamenting that consumers have so many entertainment choices nowadays that they might shy away from DVD purchases even if the economy were not in recession.

He also noted that the average DVD household in the U.S. contains about 80 DVDs, so their collections could be considered fairly complete.

Add all those challenges to the DVD business, and one ends up with consumers who "buy things that they believe they are absolutely going to want to watch instead of things that just might be nice to have," Iger said.

He said Disney will reduce production, marketing and distribution costs of DVDs. "The cost of the system needs to come down," he said.

Overall, Disney reported a quarterly net profit that fell 32% to $845 million on revenue that was off 8% to $9.6 billion. Disney reported the numbers after the closing bell Tuesday, and its stock promptly dropped 8% after having gained 2% during the regular session to $20.62.

The studio saw revenue of $1.95 billion, down 26% from the same quarter last year, and operating income of $187 million, down 64%. Lower DVD catalog sales were the culprit, and the quarter's major DVD releases undersold last year's crop.

Key DVD releases in this year's fiscal first quarter included "The Chronicles of Narnia: Prince Caspian," "Tinker Bell," "WALL-E" and a "Sleeping Beauty" Platinum Edition release. Last year's were "Pirates of the Caribbean: At World's End," "High School Musical 2," "Ratatouille" and "The Jungle Book" Platinum Edition.

Disney's media networks unit posted a 5% drop in revenue to $3.9 billion and a 29% decrease in operating income to $655 million, in part because of lower advertising revenue and higher programming costs at ESPN and lower primetime ratings at ABC.

Parks and resorts suffered a 4% decline in revenue to $2.7 billion and a 24% drop in operating income to $382 million.

Consumer products notched an 18% gain in revenue because of the acquisition of the Disney Stores North America, but operating income fell 8% to $265 million.

Interactive media -- consisting of video games, Disney Online, virtual worlds and Disney-branded mobile phone initiatives -- posted a 13% increase in revenue to $313 million. Operating income, though, fell from $13 million a year ago to negative $45 million.

Both Iger and CFO Tom Staggs said that Disney is looking to beef up the interactive division with more virtual worlds, like Club Penguin, and other digital niceties.