Disney reports net income drop
But Q2 results topped expectationsDisney's net income in the fiscal second quarter dropped 46%, and Bob Iger has put the blame largely on the film studio, where operating income plunged 97%.
Part of the problem were tough comparisons, but the president and CEO reiterated that, when it comes to the film studio, measures are under way for cutting costs related to production, output, marketing and global infrastructure.
In fact, Iger said he will "address costs virtually at every level."
Overall, Disney reported net income of $613 million, down from $1.13 billion, on revenue that fell 7% to $8.1 billion. The results beat the expectations of Wall Street, and shares were 5% higher in after-hours trading after having inched up 1% to $23.15 during the regular session.
The studio division notched only $13 million in operating income compared with $377 million a year ago. Revenue tumbled 21% to $1.4 billion. The big drags were domestic DVD sales and worldwide theatrical distribution.
On the DVD front, the titles "High School Musical 3: Senior Year," "Beverly Hills Chihuahua" and "Bolt" underperformed relative to "Enchanted," "Game Plan" and "No Country for Old Men" a year ago.
Theatrical performances during the quarter that Iger termed "disappointing" were "Confessions of a Shopaholic," "Race to Witch Mountain" and "Bedtime Stories."
"It's not the marketplace, it's our slate," Iger said, acknowledging that the movie exhibition industry has been on a tear this year.
Last year's better-performing releases were "National Treasure 2: Book of Secrets," "Enchanted" and "Hannah Montana/Miley Cyrus: Best of Both Worlds."
"After posting strong results last year, studio performance was disappointing, something they would be the first to admit," Iger told analysts Tuesday during a conference call.
Disney's biggest unit, media networks, posted operating income that was off 4% to $1.3 billion on revenue that rose 2% to $3.6 billion. Cable networks posted a 5% increase in operating income, while broadcasting decreased 38%.
Iger gave a shoutout to a couple of Disney Channel shows that recently got off to a good start: "JONAS" and "Sonny With a Chance."
Both Iger and CFO Tom Staggs said the TV ad market, while not as robust as a year ago, is stabilizing.
Iger talked up the company's recent decision to join NBC Universal and News Corp. in taking an ownership stake in Hulu. Separately, he said an online Disney-branded subscription service for movies could be on the horizon.
Disney's theme parks also declined significantly as they attracted about the same number of people as a year ago but those visitors spent less money. The parks and resorts unit reported operating income that was down 50% to $171 million on revenue that fell 12% to $2.4 billion.
Consumer products operating income fell 24% to $97 million on revenue that rose 9%, with the revenue gain stemming from the company's decision to take back ownership of Disney Stores North America.
Operating income for interactive media fell 2% to negative $61 million on revenue that fell 17% to $129 million, with the revenue decline owed to a comparison with last year's big self-published video game "Turok."
Disney also recorded $305 million in charges during the quarter, some related to FCC licenses, an investment in an Indian media company and layoffs primarily in the parks and resorts segment.