The Breakdown

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Disney earnings: This company is all about broadcast and parks

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Disney just released earnings for its third fiscal quarter. They beat analysts' expectations in terms of profit, but the company missed on total revenues (although not by much). There's a story within that story, however, that relates to recent trends for the Mighty Mouse.

At about $11 billion, the company's revenue was up 4 percent from the third quarter of 2011 (Wall Street wanted more). Earnings per share were up 31 percent, from to $1.01 in 2012 versus $0.77 in 2011.

A decent quarter, but that's just the beginning of story. If you look at Disney's revenues, you see that stuff like the Disney Channel and ESPN — broadcast — and the parks and resorts business combined accounted for roughly $8.5 billion. That's...77 percent of total revenue for the quarter.

The movie business is at $1.6 billion.

And interactive is almost a rounding error, at $196 million. Interactive was also the only operating segment to lose money year-over-year. And it lost a lot of money, down 22 percent from 2011. Consumer products — merchandising — is three times are large, with third-quarter revenues at $742 million.

Disney is probably delighted, after the debacle of "John Carter" — a debacle that cost the head of the movie business, Rich Ross, his job — that the film segment was basically "flat," as the company put it the earnings release. But even the monumental box-office results of the "The Avengers" couldn't put the segment in the black.

If you look at Disney as a company right now, it's running a very successful cable TV and parks business. The core of the company has shifted to these areas. But the creative core remains the movie business, which at this point is improving in terms of performance, but diminishing when it comes to contribution to the bottom line. 

The real problem child is interactive, which is neither contributing much in terms of overall revenue nor growing. This, unfortunately, is the future. So while a lot of eyes were focused earlier this year on what was wrong with Disney Movie Studios, the long-term crisis area is with products likes games and the online experience. For this quarter, the loss, at $42 million, was half of the 2011 quarterly loss of $86 million. So the situation is improving, but a loss is still a loss. 

Disney's diversity of businesses is a strength. The question is, "Will it make the interactive unit profitable by 2013, as it has promised?" The interactive business is run by two people, John Pleasants and James Pitaro. Pleasants runs gaming while Pitaro handles the Web products. They appear to be slowly turning the interactive unit around. But if they succeed, they're going to need to find a formula for growth.

Follow Matthew DeBord and the DeBord Report on Twitter. And ask Matt questions at Quora.

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