UPDATE, 4:15 PM: How costly a mistake was Mars Needs Moms? Disney says the studio lost about $70 million in release costs and in an impairment charge for a film it now calls “very disappointing.” Still, CEO Bob Iger tried — not always successfully — to avoid sounding sour today as analysts probed him about quarterly results that seemed to have befuddled many of them. Iger talked up the prospects for Disney’s upcoming sequels to Pirates of the Caribbean and Cars. He also banged the drum for The Avengers, the Marvel action film due next year. Now that Disney has negotiated an early exit from Marvel’s distribution deal with Paramount, Iger says the movie will be the “first really big initiative” from Disney’s acquisition of Marvel with the potential to “turn into a true franchise.” He adds that Marvel is developing a block of shows for Disney XD, as well as individual programs for ABC and ABC Family. Also on the television side, Iger says the coming upfront ad market will “be a strong one” — which is far more vague than CBS chief Les Moonves’ projection of “solid-double digit increases” for his network. Iger acknowledged that the last few years were “not as great” for ABC as they were during the heyday of its hits including Lost, Desperate Housewives and Grey’s Anatomy. But while he says that ABC has made “no decisions yet” about the primetime shows it will pick up for this fall, Iger adds that he’s “encouraged” by the pilots he has seen including “some really strong shows” from ABC itself. He says that ESPN will do just fine if the NFL season is scuttled by a contract dispute between team owners and players. “There’ll be a mad dash for male demos,” he says. Iger seemed irked, though, by a question regarding whether ESPN’s ad sales would be sufficient to justify a bid for TV rights to the Olympics. ESPN needs to be “a must-have product,” he said. The network hopes to persuade cable and satellite operators to pay higher fees for Olympic programming. If that falls short, Iger says, then ESPN executives must be “mindful of their margins.”
Iger provided a little more clarity about his digital media plans. Disney will sell shows to Netflix and other Web-streaming services even though it owns equity in Hulu. “We never believed Hulu would end up in an exclusive position,” he says. In video games, he says Disney took a five-month hiatus to refocus itself on higher quality games including some that will carry the Disney, ESPN and Marvel brands. He’s hoping the unit will break even in 2013. Now the company’s also preparing a major redesign of Disney.com to make it easier to navigate.
At Disney’s theme parks, Iger says he sees promising signs after a quarter in which the company had to temporarily close Tokyo Disney following Japan’s earthquake and tsunami. Consumers seem to be accepting the double-digit price increases at Disney hotels which shows that “the discounting we had to implement (in the depths of the recession) is something of the past.”
PREVIOUS, 1:42 PM: The terrible box office performance of Mars Needs Moms contributed to a decline in Disney’s net profits, which also fell short of analyst expectations. The company reported net income of $942 million in the quarter that ended in March, down 1% vs. the same period last year, on revenues of $9.1 billion, up 6%. The profit figure, at 49 cents a share, contrasts with the 56 cent average forecast from analysts who track the company. Operating profits fell 65% to $77 million at the Studio Entertainment unit, which benefited last year from the success of Alice In Wonderland. Disney’s theme parks also reported a decline in profits, a 3% drop to $145 million, as the company absorbed the costs for its new Disney Dream cruise ship and grappled with rising fuel prices. But the thawing ad market helped profits at the Media Networks to rise 17% to $1.5 billion. Consumer product earnings also improved 7% to $142 million with strong sales of merchandise related to Tangled and Toy Story.
There’ll be more later, after the company holds its quarterly conference call with analysts.