The Wall Street Journal-20080206-Disney Net Falls 27- as Ad Sales- Theme Parks Thrive

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Disney Net Falls 27% as Ad Sales, Theme Parks Thrive

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Walt Disney Co.'s fiscal first-quarter net income dropped 27% because of gains a year earlier, but the entertainment giant bucked the gloomy economic outlook with robust ad sales and the strong performance of its theme parks.

Last year's first-quarter results included gains from the company's sale of its share of the E! Entertainment channel and US Weekly magazine.

The results beat Wall Street expectations, in part on the strength of the Disney theme parks, which can be vulnerable to downturns in consumer spending. Overall revenue rose 9.1%. Disney said revenue in its parks-and-resorts division increased 11% to $2.8 billion, and attendance at its U.S. theme parks rose 3% from the year-ago quarter. Attendance at its Walt Disney World resort in Orlando, Fla., was up 4%.

Tom Staggs, Disney's chief financial officer, said in a conference call that both U.S. and international visitors contributed to the increases. He said the company had yet to see a slowdown caused by a cooling economy. "We aren't going to forecast the economy . . . but we are pleased with the current pace of business at our parks, and we will respond quickly to changes in market conditions, if they occur," Mr. Staggs said.

Neither the economy nor the continuing strike by film and television writers -- which affects Disney's ABC broadcast network and its fleet of cable networks, as well as its feature-film business -- had much impact on Disney's advertising sales. Revenue at the company's media- networks division, which includes ABC and the cable networks, rose to $4.16 billion from $3.78 billion.

Chief Executive Bob Iger praised the Disney Channel's "Hannah Montana" television franchise, which also saw success at the box office this past weekend in a limited release nationwide.

But the company saw relatively flat revenue at its movie studio amid a decrease in DVD sales -- a drop that mirrors an overall industry decline in DVD sales.

Disney's consumer-products division reported a 29% increase in revenue to $870 million, driven largely by the sale of merchandise from the "High School Musical" and "Hannah Montana" franchises.

Mr. Iger said the company will launch a virtual, online world for the movie franchise "Cars," adding that it is likely the company will produce a sequel to the hit film. He said consumer-product sales for "Cars" are stronger now than they were in 2006, the year the movie was released. The "Toy Story" franchise also continues to be a strong seller, more than eight years after "Toy Story 2" hit theaters, according to Messrs. Iger and Staggs.

In regard to the writers' strike, now more than three months old, Mr. Iger said the company was "heartened by the strength of advertising" for its ABC television network. He declined to comment on its preparations for Feb. 24's Academy Awards telecast on ABC, which would be salvaged entirely if the strike is settled later this week, which is a possibility.

Mr. Iger said the network will "make far fewer pilots than we have in the past because of the strike."