The flip side is that Disney wasn’t hurt in the September quarter by a $190 million writedown, the way it was last year when it had to account for The Lone Ranger. But the latest results, while good, probably won’t move the needle much for the company – its shares are down 1.2% in initial post-market trading. Disney reported net income of $1.5 billion, +7.5% vs. the period last year, on revenues of $12.39 billion, +7.1%. The top line was a hair better than the $12.37 billion that analysts expected. Adjusted earnings at 89 cents per share were a penny ahead of the consensus forecast.

The numbers cap what CEO Bob Iger calls a record performance for the fiscal year. “We’re obviously very pleased with this achievement and believe it reflects the extraordinary quality of our content and unique ability to leverage success across the company to create significant value, as well as our focus on embracing and adapting to emerging consumer trends and technology,” he says.

mario goetze world cup germanyDisney’s cable networks, which include ESPN, saw revenues increase 6% to $3.78 billion while operating income fell 1% to $1.27 billion. The company attributes a profit drop to the sports network’s higher programming costs for Major League Baseball, the NFL, college football, and the World Cup.

The broadcast operation, with ABC, generated $1.44 billion in revenue, +5%, with operating income +3% to $163 million. Advertising fell, Disney says, “due to fewer units sold” at ABC. That offset increases from program sales for Shark Tank, America’s Funniest Home Videos, My Wife And Kids — and a drop in costs following the cancellation of Katie.

At Parks and Resorts sales increased by 7% to $3.96 billion with operating income +20% to $687 million. Guests at the domestic parks spent more and attendance was up. But the company also had higher costs for its MyMagic+ program. The overseas parks didn’t fare as well as attendance dropped in costs rose at Disneyland Paris while the company shouldered preopening expenses for Shanghai Disney Resort and the effects of the weakening Yen on Tokyo Disney Resort.

The Studio Entertainment numbers stood out due to the absence of last year’s bomb and the success of Guardians Of The Galaxy and Maleficent.  Revenues rose 18% to $1.78 billion with operating income up 135.2% to $254 million.

Disney’s Interactive unit was mixed with revenues down 9% to $362 million with operating income up 13% to $18 million. It had success with a mobile game, Tsum Tsum, but was hurt by the timing of the release of Disney Infinity 2.0 at the very end of the quarter vs. last year when the earlier version came out in August.

David Lieberman November 6, 20142:02 pm

Hi everybody — we’re on the Disney quarterly conference call with Wall Street analysts. CEO Bob Iger kicks it off, talking up the company’s financials and a “new golden age for content.”

David Lieberman November 6, 20142:04 pm

Studio business has been a “tremendous content engine” with Frozen, Guardians of the Galaxy, Maleficent, and Captain America.

David Lieberman November 6, 20142:05 pm

Iger says he saw “exciting footage” from the new Star Wars. The trilogy ends in 2019.

David Lieberman November 6, 20142:06 pm

Animation is “stronger than ever” including Frozen, “the most successful animated movie of all time.”

David Lieberman November 6, 20142:07 pm

NEWS: John Lasseter will direct Toy Story 4 to be out in June 2017.

David Lieberman November 6, 20142:08 pm

ABC is “holding strong” and is No. 1 in C3 ratings excluding sports. Blackish is No. 1 new sitcom, and How To Get Away With Murder is the No. 1 new drama.

David Lieberman November 6, 20142:10 pm

Iger: “The media environment is far too dynamic for anyone to expect the status quo to continue.… Given the quality of our content and the strength of our brands Disney is in a great position to thrive in any distribution environment.”

David Lieberman November 6, 20142:11 pm

Iger calls the pay TV bundle a “much greater value than a standalone portfolio of do-it-yourself options” — meaning à la carte.

David Lieberman November 6, 20142:12 pm

CFO Jay Rasulo is up now to go over financials. The studio had record financial performance “without the release of a Pixar film.”

David Lieberman November 6, 20142:15 pm

ABC’s ad sales were down by low single digit percentage vs last year due primarily to lower ratings. Prime time scatter pricing is running 12% above upfront levels.

David Lieberman November 6, 20142:16 pm

MyMagic+ is helping the parks. Attendance at domestic parks up 4% in the September quarter. Reservations pacing up 11% and book rates are up 3%. We feel very good about the volume and pricing trends.”

David Lieberman November 6, 20142:20 pm

Proactively addressing questions about 2015. Capex will be $1.5 billion higher than in 2014, mostly from Shanghai Disney Resort.… Low teen percentage point increase in sports programming costs due to new contracts. … And there’ll be $225M higher costs for pensions and foreign exchange differentials. 

David Lieberman November 6, 20142:22 pm

On to Q&A with the analysts. A question for Iger about the appeal of smaller cable bundles: Iger says he recently saw “modest erosion of the expanded basic bundle.” But it’s going to remain the dominant package for the “foreseeable future.” Millennials are becoming subscribers a little later than they used to.

David Lieberman November 6, 20142:24 pm

A question to Iger about his priorities with his extended contract. When he became CEO almost 10 years ago he had three priorities: make great content, use technology to distribute more broadly, and grow internationally. “Those are still the priorities.”

David Lieberman November 6, 20142:25 pm

The film slate is “unbelievably strong.” Shanghai Disneyland “represents our best international growth initiative in a long time.” He hopes to announce the date it will open early next year. There are other opportunities in Asia.

David Lieberman November 6, 20142:28 pm

Rasulo says Shanghai Disneyland costs will be “pretty significant” but could be offset by the extra business and cost savings from MyMagic+ 

David Lieberman November 6, 20142:30 pm

Side note: Disney shares are down 1.6% in post market trading. 

David Lieberman November 6, 20142:32 pm

Rasulo won’t offer guidance about stock buybacks, but says about 20% of cash generated typically goes back to shareholders. Board will meet soon to discuss plans.

David Lieberman November 6, 20142:35 pm

A question about Maker Studios, the online network company that Disney bought. Rasulo says he won’t break out its financials. But “it is notable how well integrated Maker’s efforts have been across all the segments of the company.” It helped to market Guardians of the Galaxy. 

David Lieberman November 6, 20142:38 pm

Iger takes a question about advertising. “There’s no question that some money has siphoned out of traditional media and on to digital platforms.… We are an advertiser and a substantial portion of our advertising buys particularly for studios and theme parks is digital even though there’s less data than would like to back that up.”

David Lieberman November 6, 20142:42 pm

Iger: “The marketplace is mildly off or soft.” ESPN had a strong upfront and NBA and college football are doing well. At ABC “the marketplace is not great” — but it has strong shows including Scandal, Blackish, Good Morning America, and World News Tonight. When you ask the sales team about their outlook “it’s not that bad.”

David Lieberman November 6, 20142:45 pm

Question about steps Disney’s taking to ensure Star Wars‘ success. Iger says “there is no stronger IP in terms of the passion people have… It’s exceeded the expectations that we had when we made the acquisition.” That attracts great moviemaking talent including JJ Abrams.

David Lieberman November 6, 20142:50 pm

Question about a possible ESPN streaming service for everybody, not just pay TV subscribers. Iger says it’s “an interesting question and a tricky one.” But “we don’t feel a compelling need to take a product to market right now that is a direct challenge to the multichannel bundle.… We’ve already established ourselves as a company that’s pro-technology. But do you do it to a point where you’re endangering your own business model which is already facing a fair amount of challenges? It just doesn’t seem to make sense to us right now.” Even so, “we’re ready to do it if we have to.”

David Lieberman November 6, 20142:52 pm

A question about whether Disney sees any sports fatigue among viewers or advertisers. Iger says “no not really.”

David Lieberman November 6, 20142:54 pm

Iger says SEC Network results so far are “very encouraging….If ever there was a great time to launch this network, it’s now.”

David Lieberman November 6, 20142:58 pm

Question to Rasulo about ad pacing at ESPN. They’re “looking at a late moving market and advertising. People are moving cash late which makes it very hard to read. Numbers will be “slightly down low to mid single digits for ESPN. But we’re optimistic.” 

David Lieberman November 6, 20142:59 pm

Iger attacks à la carte cable pricing saying it will kill small channels resulting in “much lower choice and even more fragmentation. Everybody talks about diversity and variety, and that goes away. It’s that simple.”

David Lieberman November 6, 20143:01 pm

Iger says the inability of Nielsen to measure mobile TV viewing is “a very frustrating situation. We know there’s more consumption, but the measurement isn’t there to back it up.… I’m assuming at some point the marketplace is going to demand it and it will develop. But it’s not in sight at the moment…. My sense is we need a different type of measurement that doesn’t exist today.”

David Lieberman November 6, 20143:02 pm

And that’s it. Thanks for joining us.