iger-mouse-small.jpgWhen you’re the 3rd highest paid CEO in Corporate America, Wall Street holds you to a different standard. So after Bob Iger announced that Disney’s 3rd-quarter profit had slid 26%, shares of the stock moved sharply lower — as much as -3.5% — when the market opened this morning. The main culprit was the same for the Mouse House as for every other Big Media company — poor advertising sales at the broadcast and cable networks and O&O’s, and lousy DVD sales, as well as a slump in bookings at theme parks and resorts. News reports say J.P. Morgan downgraded Disney to underweight (from neutral) this morning. Disney has always been one of those stocks that grandparents buy for grandkids, so the stock price is felt strongly by consumers saving, say, for their kids’ college education. Revenue at Disney’s filmed entertainment division fell 12% for an operating loss of $12M. Sales of current DVD titles like National Treasure 2 and Enchanted, and older catalog DVD titles, were down in the quarter. Iger said Thursday that one way to combat decreasing DVD sales and the rising popularity of rentals is to concentrate on making movies that are more convenient to own than to rent, especially Pixar toons. Still there was some glimmer of good news: CFO Tom Staggs said ad sales “appear to have stabilized” at Disney’s broadcast and cable television networks, echoing remarks from Viacom and Time Warner. But Staggs predicted lower upfront sales at ABC than in recent years.

Here’s the email Iger sent out to Disney employees yesterday:

Dear Fellow Cast Member:

Today, we announced our third quarter 2009 earnings which reflected the challenging global economy. Our earnings per share for the quarter before restructuring and impairment charges were $0.52 compared to $0.62, excluding certain gains in the prior year period. Revenues declined by 7%.

Despite the decline, we remain encouraged by the relative strength of our businesses. The Disney brand continues to differentiate us in the global marketplace. Our business strategy, with its emphasis on creativity, technology and international expansion to grow shareholder value, is working.  And we’ve proven our commitment to making our operations more efficient while preserving quality. We do see signs of economic stabilization, but the pace and strength of recovery remain uncertain and we are managing accordingly.

At our movie studio, Up has proven to be an artistic triumph and a big commercial success around the world with many important international markets yet to open. We are very enthusiastic about our upcoming animated films The Princess and the Frog and Toy Story 3. Like Up, these films embody the strengths of classic Disney movies – solid storytelling, memorable characters, wonderful artistry and heartfelt emotion. On the live action front, Disney’s A Christmas Carol, Alice in Wonderland and Prince of Persia are shaping up to be amazing movies by visionary filmmakers that display great creativity with cutting-edge technology.

Our media networks also performed well during the quarter despite the tough economic environment. ESPN maintains its strong appeal across multiple platforms, solidifying its status as the number one media destination for sports fans.  Disney Channel delivered impressive ratings growth during the quarter and continues to find and develop new talent and creative franchises that benefit many of our businesses.

We are also excited by ABC’s fall schedule, with drama Flash Forward and comedy Modern Family already winning critical acclaim and potentially adding to our slate of proven hits like Dancing with the Stars, Desperate Housewives, Grey’s Anatomy and Lost, which enters its sixth and final cliffhanger of a season.

Our parks and resorts have clearly been impacted by the weak economy.  We’ve sought to sustain attendance through a number of promotions that offer great value to families and we’ve sought to reduce costs while continuing to offer an exceptional guest experience. Over three million people have signed up to enjoy their birthday at our parks through the What Will You Celebrate? campaign. I’m proud of what we’ve been able to do – the strong levels of attendance and guest satisfaction at our parks during this period underscores the tremendous affinity consumers have for Disney.

Throughout this period, we’ve been mindful of the need to invest in our future while sticking to the strategic priorities we’ve followed over the last three years. I’m pleased to say we’ve concluded an agreement to expand Hong Kong Disneyland, adding unique and compelling attractions that we believe will draw more visitors and keep them staying longer. Work is also well underway on the expansion of Disney’s California Adventure, on our two new cruise ships and on our Hawaiian resort.

We are also pursuing new opportunities.  After a successful test in Chicago, ESPN is aggressively expanding local coverage to serve sports fans in several major cities, including New York, Los Angeles and Dallas. In Europe, ESPN has substantially enhanced its profile by purchasing rights to English and Scottish Premier League football matches.

Our opportunity to grow obviously extends to online platforms. We have ample evidence from both traditional and new media that people are willing to pay for quality, to pay for choice and to pay for convenience, and they are willing to pay for what they perceive as value. We are developing services that meet these criteria using the amazing range of entertainment content we’ve created over the years.

We will continue to look for ways to substantially grow our businesses and to build long-term shareholder value even as we manage through this downturn. Any investment we make must promote our brand strategy, add to our offerings of high-quality content and experiences and be relevant across technological platforms as well as geographical and cultural boundaries.

It’s a challenging time, marked by rapid technological change and economic dislocation, but I like the way we are positioned and I like the opportunities it presents to companies like Disney that have a clear strategic focus, that embrace innovation and aren’t afraid of change. I am also tremendously proud of you, our employees and cast members, and the constant creativity and enthusiasm with which you approach the challenge of meeting the highest expectations of consumers around the world.

For further details on this quarter, including a reconciliation of earnings per share before impairment and restructuring charges in the current period and gains related to acquisitions, dispositions and the favorable resolution tax matters in the prior year period to diluted earnings per share as reported under GAAP, please go to: Disney.com/investors.