Walt Disney Co. Facing $190 Million Loss on 'Lone Ranger'

The Lone Ranger Hammer on Horse - H 2013
Disney Enterprises, Inc.

The Lone Ranger Hammer on Horse - H 2013

Earnings beat expectations in fiscal Q3 despite big marketing costs for the Johnny Depp-starring movie, but the bomb's effects won't be fully felt until the next quarter.

The Walt Disney Co. posted quarterly earnings of $1.03 per share after certain items on revenue of $11.6 billion, but the film studio suffered under the weight of marketing expenses for The Lone Ranger, a bomb that could ultimately cost the entertainment conglomerate $190 million.

The company had been expected to earn $1.01 per share on revenue of $11.64 billion, and a year ago in the same quarter the conglomerate earned $1.01 per share on $11.1 billion revenue.

The studio entertainment unit saw revenue decrease 2 percent to $1.6 billion and operating income drop 36 percent to $201 million due in part to marketing costs for The Lone Ranger.  That film, which cost $250 million and has generated $175.6 million at the worldwide box office, is expected to dent Disney's earnings in the current quarter, as well. During a conference call with analysts, Disney said it expects to take a loss of $160 million-$190 million due to The Lone Ranger, including about an $86 million impairment charge.

Helping Disney offset the marketing costs associated with The Lone Ranger were strong performances from ESPN and Monsters University, which outperformed Brave a year ago.

The conglomerate's media networks unit showed a 5 percent gain in revenue to $5.4 billion and an 8 percent rise in operating income to $2.3 billion. Beyond ESPN, to unit's A&E Television Networks and its domestic Disney Channels performed admirably, though ABC Family showed a decrease in operating income.

Broadcast television suffered a decline in operating income because of higher sales last year for Grey's Anatomy and Castle, as well as declining network ratings in general and a lack of political advertising.

During Tuesday's conference call to discuss earnings, Disney CEO Bob Iger was asked to weigh in on the carriage dispute between CBS and Time Warner Cable. He said the dispute is bringing unwanted attention to the industry but he doesn't sense that government intervention is imminent.

"We never like to see battles like this," Iger said.

Outside of the studio the only segment to show declining revenue was interactive, where sales dropped 7 percent to $183 million.

The Parks and Resorts segment showed a 7 percent rise in revenue to $3.7 billion and the consumer products segment recorded a 4 percent climb to $775 million. Operating income at those two segments was up 9 percent to $689 million and 5 percent to $219 million, respectively.

Despite the failure of The Lone Ranger, Iger said the film studio will stick by its strategy of making big, tentpole films, although he added that Disney "certainly can attest" to the risk involved.

Disney shares advanced 2 percent on Tuesday to $67.05 but were slipping nearly that much during the after-hours session as investors mulled impressive earnings-per-share that came on less-than-anticipated revenue.

Disney stock has been on a tear of late, having risen 35 percent so far this year. At the close of trading Tuesday, the company sported a $120.4 billion market capitalization, putting it just ahead of Comcast and making it the nation's most valuable entertainment conglomerate.

Email: Paul.Bond@THR.com