Updated: Disney Reports 32% Profit Dip for First Fiscal Qtr.

Walt Disney Co. on Tuesday reported a 32 percent drop in profit for its first fiscal quarter, as a worsening economy shook the company’s TV, studio and parks units.Net income toppled to $845 million, or 45 cents a share, compared to $1.25 billion, or 63 cents a share, in the year-ago period. Revenue dropped 8.2 percent to $9.6 billion.“We faced a challenging first quarter with many of our businesses impacted to various degrees by the economic downturn,” said Robert Iger, Disney’s president and CEO.Disney’s TV business was particularly disappointing, as operating income at the media networks division tumbled 29 percent to $655 million, on a 5 percent decline in sales ($3.9 billion, versus $4.11 billion in the prior-year period).While Disney’s cable networks group––which includes ESPN, Disney Channel and ABC Family––saw operating profit fall 12 percent to $517 million, revenue crept up slightly, rising 2 percent to $2.45 billion. That said, broadcasting really took it on the chin in the quarter, as operating income for the unit, including local stations, plummeted 60 percent to $138 million on a 14 percent decline in revenue. Sales added up to $1.45 billion at ABC and the O-&-Os, down from $1.7 billion a year ago.Both cable and broadcast’s fortunes declined because of a softening ad market, although ABC has also had to contend with a ratings slide. Season-to-date through Jan. 25, ABC’s nightly delivery is off 7.7 percent versus the same time a year ago, per Nielsen data, while its showing among the 18-49 demo fell 10.3 percent.“ESPN’s current ad sales declined by high-single digit percentage points in the quarter,” said Disney chief financial officer and senior executive vp Thomas Staggs, who added, “the decrease was due in part to softness in several categories, including consumer electronics and automotive.”Looking forward, Staggs said that ESPN’s second-quarter ad business is pacing “slightly behind the comparison we saw in Q1,” while ABC Family is up versus the prior-quarter. ABC’s numbers also reflected a $60 million charge the broadcaster took related to a syndication customer’s bankruptcy filing. Studio profit dropped 64 percent to $187 million, as DVD sales were held up by a consumer spending freeze. Iger said that while the country will have to get through "what is likely to be the weakest economy in our lifetime," the recession isn’t the only factor that’s eating into Disney’s bottom line."We don't believe the changes we’re seeing in consumer behavior can all be attributed to a weak economy,” Iger said. “It’s important for us to address them as more than just cyclical issues.”Theme-park profit declined 24 percent to $382 million.Last Thursday, Disney/ABC announced that it would pare down its staff by 5 percent, laying off 200 employees and leaving another 200 positions to go unfilled. The cuts were to be spread across the broadcast, cable and news divisions. More restructuring is in the cards, said Iger. “We’re not going to quantify what our target is in terms of our overall cost reduction,” he said. “But I can tell you that the number is going to be very significant. We’re being very aggressive, but we’re very responsible.”

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Updated: Disney Reports 32% Profit Dip for First Fiscal Qtr.

Anthony Crupi

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