Media Decoder Blog: Buoyed by ‘Avengers,’ Disney Profit Surges 24 Percent

LOS ANGELES — The success of the film “Marvel’s The Avengers” and the “Cars”-related expansion of a theme park powered the Walt Disney Company to a 24 percent increase in quarterly profit, well ahead of expectations, the company reported Tuesday.

Disney, with operations ranging from movies to hotels to baby clothes, is closely watched as a barometer of consumer confidence. Lately, however, that correlation has seemed out of alignment. Why is Disney surging when the frail economy has people keeping a lid on discretionary spending?

The answer may be that consumers simply see Disney’s recent offerings (with a few notable exceptions) as attractive ways to spend their money.

Many people grumble that Disney’s parks are expensive, but they also seem to see the value. Attendance was strong in the quarter at both Walt Disney World in Orlando, Fla., and at Disney’s California Adventure park in Anaheim, Calif., where a lavish “Cars”-themed parcel recently opened as part of a $1.1 billion overhaul. Disney said per capita guest spending at its domestic resorts increased 8 percent. Add in strong bookings for a new cruise ship and a return to normal at Tokyo Disney Resort after last year’s earthquake, and operating income at Disney’s parks unit rose 21 percent, to $630 million.

Similarly, “The Avengers” has taken in over $1.5 billion at the global box office, in part because that superhero film prompted consumers to pay more — $3 to $5 more per ticket — to see it in 3-D. For the quarter ended June 30, Walt Disney Studios reported operating income of $313 million, an increase from $49 million a year earlier. Disney announced on Tuesday that Joss Whedon, who directed “The Avengers,” would return for a sequel and help develop a Marvel-related property for the company’s ABC broadcast network.

Fans were also shopping briskly during the quarter at Disney’s mall-based retail stores, where “Avengers”-themed merchandise and new locations helped the company’s consumer products division report a 35 percent increase in operating income, to $209 million.

Disney’s long-suffering Internet division even looked healthier, improving to a loss of $42 million, compared with a loss of $86 million in the same period a year ago, mainly because of increased traction in social games. (Disney told analysts that the coming quarter might be more difficult, however, because of the release of fewer console games.)

Robert A. Iger, Disney’s chief executive, called the results “phenomenal” in a statement, adding that the totals were “the largest quarterly earnings in the history of our company.” Disney had net income of $1.83 billion, or $1.01 a share, compared with $1.48 billion, or 77 cents a share, in the year-ago quarter. Analysts had been expecting income of 93 cents a share.

Revenue for the quarter, the third in the company’s fiscal year, climbed 4 percent, to $11.09 billion, held down because of a timing shift in the recognition of ESPN-related affiliate fees. At Media Networks, the Disney unit that includes ESPN, ABC and cable channels like ABC Family, operating income climbed 2 percent, to $2.13 billion. ESPN did suffer higher production costs tied to a shift in timing for National Basketball Association games and higher rates for N.B.A. and Major League Baseball programming.

In recent years, some analysts have questioned Disney’s high level of capital and acquisition spending, citing global economic weakness. But the most recent quarter offered a strong endorsement of the investment strategy set by Mr. Iger.

“The Avengers” was made by Marvel Entertainment, which Disney acquired in 2009 for $4 billion. Cars Land cost about $450 million, but it seems to have turned around California Adventure, a park that languished for a decade because of underinvestment by Mr. Iger’s predecessor.

Article source: http://mediadecoder.blogs.nytimes.com/2012/08/07/disney-profit-rises-24-aided-by-avengers-and-a-theme-park-expansion/?partner=rss&emc=rss