Frank Ahren :
(©, The Washington Post, November 9, 2002)
New dawn at Disney?
Strong yearly results provide bright spot amid
theme-park slump and
How fares the Mouse? Investors wonder if its stock is irreparably battered by poor
theme-park attendance, heavy debt, and an unrelenting media recession. Or is the
revered rodent gamely fighting out of its corner, punching back with new hit TV shows
and surprising growth projections?
Thursday marked the end of the financial year
for Walt Disney Co., a year that was
"difficult on many fronts," according to its chief executive, Michael Eisner, but one that
he said ended with the company in better position to grow than it was a year ago.
The media Goliath - which owns Disney studios,
Touchstone Pictures, ABC television
and radio, the ESPN sports networks and several theme parks worldwide - did report
a profit of $1.3 billion for the year, up from $891 million a year earlier. And for the
quarter just ended, Disney had earnings of $222 million, compared with $188 million a
Lurking behind those numbers, though, is a troubling
slump at the theme parks and the
inability thus far of ABC to pull itself out of third place in the network wars. In fact,
losses in the parks, media and consumer products divisions were offset only by
double-digit gains in the surging motion picture division.
Eisner said the company expected earnings to grow
more than 20 percent in the
current financial year as a result of companywide cost-cutting, the release of low-cost,
high-return animated movie sequels and a turn away from new capital expenditures and
toward marketing what Disney has already built.
He cited the success of some of ABC's prime-time
shows, such as the new John Ritter
comedy, "Eight Simple Rules for Dating My Teenage Daughter," and the so-called
reality series "The Bachelor." Ratings among core male viewers of ESPN channels
were higher, and hits such as "Signs" and "Lilo Stitch" pushed movie revenue up 11
percent over the previous year.
The company's long-sliding consumer products division
continues to lose money, but
executives said it had "turned the corner," citing the division's line of merchandise
featuring many of the studio's animated heroines, which accounted for $140 million in
revenue last year, a number projected to grow to $1.3 billion by the end of next year.
Bolstering Eisner's optimism, the stock has climbed
over the past month from about
$14 a share to more than $18. Late Friday in New York, Disney shares were 74 cents
lower at $17.52.
"With the assets now in place, our transparent
and solid balance sheet, our world-class
brands and world-class management and an action plan that is realistic, we will see the
return to growth we've had since 1984," Eisner said. That was the year he was hired to
head the company.
The stock price, though, is still well off its
peak of more than $40 in early 2000. Some
analysts said much of any Disney stock turnaround would depend on rebounds in two
key areas: the company's theme parks and its ABC television network, which will earn
Disney nearly $2 billion in advertising revenue for its 2002-2003 prime-time shows -
less than the ad income at rival networks.
Revenue from Disney's four theme parks accounted
for 26 percent of the company's
bottom line during the year. Money from the company's media assets such as ABC,
ESPN and the Lifetime network made up 39 percent.
In the wake of the terrorist attacks in the United
States last year, the company has
seen about a 5 percent overall drop in attendance at its Disneyland and Walt Disney
World resorts, which have been its most predictable revenue engines. For the year,
theme-park revenue was down 8 percent to $6.5 billion.
During Disney's third quarter, attendance by visitors
from abroad at the U.S. parks
was down 35 percent. During the quarter just ended, the company said Thursday,
foreign attendance fell 20 percent.
Disney executives have "made as many cuts as they
possibly could," said Tom
Wolzien, a media analyst for Sanford C. Bernstein in New York. "It's just a case of
how the wind is blowing at the time," he said, because there is little Disney can do
about park attendance.
The company recently opened a new park, California
Adventure, and will break
ground on Hong Kong Disneyland in January. The current climate is "a terrible time to
open a park," Wolzien said, but he said attendance at California Adventure had
mitigated a slump in revenue at the established parks.
Meanwhile, over at ABC, the autumn prime-time
lineup has produced only mixed
One highly promoted show, "Push, Nevada," a viewer-interactive
canceled after seven of its 13 scheduled episodes as yawning viewers evidently were
not enticed by the chance to win more than $1 million if they solved the mystery before
the show's characters did.
Overall, ABC still trails the other big U.S. networks.
So far this season, ABC's
prime-time shows are averaging 9.8 million viewers a night, compared with 13.1
million for CBS, 12.4 million at NBC and 10.5 million for Fox. ABC's average also is
down from 10.2 million a year earlier, according to Nielsen Media Research.