Disney profit increases 55%

By Ben Fritz

May 12, 2010 12 AM PT

Box-office smash “Alice in Wonderland” helped fuel a strong performance at Walt Disney Co. in the first three months of the year even as attendance at its domestic theme parks, considered an indicator of the strength of the economy, fell slightly.

In total, the Burbank-based entertainment giant reported a 6% increase in revenue to $8.58 billion and a 55% jump in net income to $953 million for the quarter ended April 3, the second on Disney’s fiscal calendar.

Walt Disney Studios, which had a disappointing 2009, reported a 7% jump in revenue to $1.54 billion and grew its operating income to $223 million from $13 million a year ago. The improvement was primarily due to “Alice,” which was released March 5 and has grossed $960.4 million worldwide.

The 3-D picture directed by Tim Burton was produced under the regime of former studio Chairman Dick Cook, who was fired last year. In comments to Wall Street analysts Tuesday, the company’s chief executive, Robert Iger, focused on the new executive team led by Chairman Rich Ross.

“Under the new studio leadership, a focus on franchise films such as ‘Toy Story 3’ is an important part of the growth strategy,” he said.

In addition to the third “Toy Story,” set to be released next month, Disney has high-profile sequels to “Pirates of the Caribbean” and Pixar’s “Cars” and “Monsters, Inc.” coming in the next two years.

Disney also reported a $71-million restructuring charge primarily related to the closure in March of ImageMovers Digital, director Robert Zemeckis’ motion-capture production house.

Domestic park attendance declined 4% in the quarter, with attendance at Disneyland in Anaheim flat and Disney World in Florida down 6%. Overall theme park revenue grew 2% to $2.45 billion as consumers spent more on average, but operating income dropped 12% to $150 million.

Chief Financial Officer Jay Rasulo said Disney purposely reduced its park discounts last quarter with the knowledge that it would affect attendance in the short run. “Consumers are still waiting for bargains,” he admitted. “I think we’re waiting for each other to blink.”

Continued growth at powerhouse sports network ESPN drove a 9% jump in Disney’s cable networks revenue to $2.4 billion and a 3% increase in cable operating income to $1.18 billion.

The ABC network has seen ratings drop this year, leading broadcast revenue to grow just 1% to $1.43 billion while operating income plummeted 24% to $123 million.

Iger noted, however, that advertising rates have increased substantially recently, a good sign as ABC prepares to start selling ads for the new television season starting in the fall.

Iger made a point of promoting his company’s recent $4-billion acquisition of Marvel Entertainment, citing the successful opening last weekend of “Iron Man 2,” which was produced by Marvel and distributed by Paramount Pictures.

Disney stock closed up 1% at $34.76 before financial results were released, then declined 3% in after-hours trading.

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