as part of our
The Walt Disney Company
) reported better-than-expected earnings Tuesday night. Investors
also cheered news from CEO Bob Iger that the company is
aggressively moving forward with Lucasfilm, maker of the Star Wars
films, which Disney bought in a deal valued at $4.1 billion in
October. More on that below.
Disney Parks and TV Assets Turned in a Strong
In its fiscal 2013 first quarter, which ended December 29, 2012,
Disney saw its revenue rise 5.2%, to $11.34 billion from $10.78
billion a year ago. But net income declined 5.6%, to $1.38 billion.
Earnings per share fell 3.8%, to $0.77, on fewer shares
outstanding. Excluding certain non-recurring items, Disney earned
$0.79 a share, topping the consensus forecast of $0.76
Analyzing Disney's prospects can sometimes be a tricky
proposition, because the company operates in a mind-boggling array
of businesses, from cruise lines to retail stores and TV stations.
The largest slice of its revenue (45.0% in the latest quarter)
comes from the media networks division, which owns the ABC
television network and a number of cable channels, including ESPN,
ABC Family, the Disney Channel and A&E.
In the latest quarter, media revenue rose 6.7%, to $5.1 billion.
Operating income rose just 2%, however. Production costs rose at
ESPN, but that was offset by higher revenue at the cable stations.
ABC also benefited from a rise in advertising spending,
particularly on political ads.
The other big slice of revenue (29.9%) comes from its parks and
resorts division, where Disney also saw gains in the latest
quarter. The segment's revenue jumped 7.5%, to $3.4 billion,
largely on the strength of higher guest spending and more visitors
in the U.S. Operating income rose 4%.
The parks business should continue to perform well. According to
a November report from the U.S. Travel Association, Americans will
take 1.680 billion person trips for leisure (defined as one person
away from home overnight in paid accommodations) in 2016, up from
1.575 billion in 2012. It's a safe bet that a good number of those
excursions will be to a Disney theme park.
Disney Owns Some of the World's Leading Film
The rest of the company's sales came from its studio
entertainment business (13.6%), consumer products (8.9%) and
interactive (2.6%) divisions.
Disney owns the rights to some of the most popular films ever
made. It founded its main Walt Disney Studios business back in
1950. Since then, Disney has added to its movie-making assets
through a series of acquisitions, including its $7.4-billion
purchase of Pixar, maker of the
films, in 2006. It added Marvel in 2009 at a cost of $4.2
The Disney studio division's performance can be erratic,
however, because of the high marketing and production costs
associated with moviemaking. For those reasons, studios typically
churn out a relatively small number of films in a typical year, and
a poor performer, or even a smaller than usual number of titles,
can put a big dent in profits.
In the latest quarter, for example, Disney's studio revenue
dipped 5%, to $1.5 billion, and operating income fell 43%, to $234
million. On the home entertainment side, the company was up against
a strong performance from its
Diamond Release in the prior-year quarter. In movie theaters,
meanwhile, results were held back by higher distribution costs for
Monsters, Inc. 3D
The Lion King 3D
also posted strong results last year.
Lucasfilm Could Be the Next Pixar
The company's recent moves suggest it could be on the verge of
repeating the success of Marvel and Pixar with Lucasfilm. Disney is
currently working on Episode VII of the nine-part Star Wars series,
with release slated for the summer of 2015. As well, on Wednesday
the company said that it is planning two spinoffs of the Star Wars
saga that will focus on specific characters.
Disney is bringing in industry-leading professionals to work on
the new Star Wars movies. For example, it has hired Lawrence Kasdan
to write one of the two spinoffs; Kasdan wrote the screenplays for
The Empire Strikes Back
Return of the Jedi
The company has also hired J.J. Abrams to direct Episode VII and
Michael Arndt, who won a best screenwriting Oscar for 2006′s
Little Miss Sunshine
, to write the script. Abrams has a long history in TV, including
as a co-creator of the hit
series. More recently, he has been lauded for his work on the new
Star Trek franchise. His next Star Trek movie,
, is due out May 17.
The first Star Wars movie,
Episode I: A New Hope
, which was released in 1977, remains the second-highest-grossing
film of all time (adjusted for inflation), according to Box Office
Mojo. However, creator George Lucas's prequels, the first of which
was released in 1999, were not as well-received, so there will be
pressure on Disney to turn the franchise around. By bringing in
some of the top talent in the business, management is showing that
it's up to the challenge.
Meanwhile, the company has a wide range of other assets it can
bring to bear to make the Star Wars films successful, including the
expertise of Pixar and Marvel and its wide array of distribution
channels, including its theme parks and retail stores, which will
help sell more products tied to the brand. For more high-flying
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This article by Chad Fraser originally appeared on