DVD sales drop 9% in Disney's fiscal Q1

Company earnings fall 27%

By Danny King -- Video Business, 2/5/2008

FEB. 5 | Walt Disney Co.’s fiscal first-quarter earnings fell 27% from a year earlier, including DVD sales that were 9% lower than the comparable prior year period.

Home entertainment titles such as Ratatouille and Pirates of the Caribbean: At World’s End failed to match the success of year-earlier releases, including Cars and Pirates of the Caribbean: Dead Man’s Chest.

“We had strong but not as strong performance in home entertainment” as a year earlier, chief financial officer Thomas Staggs said in a conference call, adding that the limited overseas DVD release of Ratatouille, compared with a broader international DVD release of Cars a year earlier, created “tough comparisons.”

Studio entertainment operating income fell 15% to $514 million on flat revenue.

Theatrical sales were led by National Treasure: Book of Secrets and The Game Plan. CEO Robert Iger said income could rise later this year when High School Musical is released in theaters.

Disney's shortfall in studio entertainment was more than offset by Disney’s media networks and resort units.

Net income for the quarter ended Dec. 29 was $1.25 billion, or 63¢ a share, down from $1.7 billion, or 79¢, a year earlier. Revenue rose 9.1% to $10.5 billion. This beat analysts' expected profit of 52¢ a share on revenue of $10 billion, the average analyst estimate in a Thomson Financial survey.

Media networks, which accounted for 40% of Disney’s revenue, had a 28% jump in operating profit. Advertising revenue rose both at Disney’s cable networks, where expanded NASCAR programming boosted ad sales at ESPN, and at broadcasting unit ABC, which was the leading network during the November sweeps period, Staggs said.

“Live sports are still very attractive from an entertainment perspective,” said Iger, adding that the Writers Guild of America strike “did not have a significant impact on the quarter.”

Operating earnings at Disney’s parks and resorts unit rose 25% as a weak dollar boosted spending from overseas tourists at U.S. resorts Walt Disney World and Disneyland. Attendance at parks in Paris and Hong Kong increased by more than 10%, Staggs said.

Disney’s year-earlier net income was boosted $627 million, or 29¢ a share, by the sale of its interests in E! Entertainment and Us Weekly, the company said last year.