Tag Archives: Financial

Disney Considering Layoffs to Cut Costs

Walt Disney Studios

Walt Disney Studios

Layoffs at the Walt Disney Company’s studios and other units may take place in the wake of an internal cost-cutting review begun by the Mouse House several weeks ago, according to “three people with knowledge of the effort.”

Due to improved technology, Disney is pondering cutbacks in jobs that it no longer needs, one of the three told Reuters. It’s also examining redundant aspects of its empire that could be eighty-sixed after several major acquisitions over the past several years, the person added.

Although Disney has used layoffs to smooth operations, staff cuts are not certain at this point, the source added. The company is considering a hiring freeze instead of layoffs, a second source said.

The sources requested anonymity because Disney has not acknowledged the review publicly.

Disney’s studio division is the least profitable of the entertainment giant’s four major product divisions, having had a profit margin of 12.3% last year. Cuts will most likely take place at the studio division, two of the three sources said.

The company has changed its business practices to make fewer films and depend more on such outside studios as Steven Spielberg’s DreamWorks. The studio finances its own films, and paying Disney a marketing and distribution fee.

Tony Wible, an analyst with Janney Montgomery Scott, suggested that Disney may cut jobs at the studio and interactive divisions, along with its music arm. His company has a neutral rating on Disney stock.

“This is not necessarily a negative thing,” Michael Morris, an analyst with Davenport and Co., said of the possible layoffs. “It speaks to a fiscally responsible management.”

Though Morris was unaware of the review, he has a buy recommendation on the stock.

Disney shares dropped Monday by 2.3% to close at $50.97.

DreamWorks Animation’s Profit Rises by 24 Percent

DreamWorks Animation

DreamWorks Animation

DreamWorks Animation had net income of $24.4 million for the third quarter ended September 30, up 24% from $19.7 million for the same period in 2011, the studio announced Thursday.

For the quarter, the company reported total revenue of $186.3 million. This compares to revenue of $160.8 million for the same period in 2011.

“DreamWorks Animation’s third quarter results were driven by the blockbuster international box office success of Madagascar 3: Europe’s Most Wanted, which has earned nearly $720 million at the worldwide box office to date, to become the fifth highest-grossing film of the year on a global basis,” said CEO Jeffrey Katzenberg. “We are looking forward to the next major event film for the company during the fourth quarter, the November 21 theatrical release of Rise of the Guardians.”

Madagascar 3: Europe’s Most Wanted¬†contributed about $47.1 million of revenue to the quarter, driven primarily by its performance at the worldwide box office. Released on June 8, the film has grossed over $216 million at the domestic box office and approximately $503 million at the international box office to date.

Puss In Boots contributed $44.8 million of revenue to the quarter, driven primarily by domestic and international pay television. The film reached an estimated 5.6 million home entertainment units sold worldwide through the end of the third quarter, net of actual and estimated future returns.

Kung Fu Panda 2 contributed $9 million of revenue to the quarter, driven primarily by international pay television. The film reached an estimated 6 million home entertainment units sold worldwide through the end of the third quarter, net of actual and estimated future returns.

Megamind contributed 700,000 of revenue to the quarter and reached an estimated 5.6 million home entertainment units sold worldwide through the end of the third quarter, net of actual and estimated future returns.

DWa’s library contributed approximately $50.6 million of revenue to the quarter. All other items, including non-feature film businesses, contributed $30.1 million of revenue to the quarter.

The company’s acquisition of Classic Media, which closed August 29, contributed about $4 million of revenue to the quarter, primarily from home entertainment.

Costs of revenue for the third quarter equaled $114 million. Selling, general and administrative expenses totaled $36.5 million, including approximately $3 million of stock-based compensation expense.

The company’s income tax expense for the third quarter was $14.3 million. Its combined effective tax rate — the actual tax rate coupled with the effect of the company’s tax sharing agreement with a former stockholder — was approximately 34.5% for the third quarter.

DreamWorks Animation’s fourth-quarter results are expected to be driven primarily by the continued performance of Madagascar 3: Europe’s Most Wanted in the international box office, as well as the global home video market. The November 21 theatrical release of Rise of the Guardians is also expected to contribute to the company’s fourth-quarter results.

Disney Writing Down $50 Million at Movie Studio

Walt Disney Studios

Walt Disney Studios

The Walt Disney Company will record a $50 million write-down at its movie studio division after halting production on an as-yet untitled stop-motion animated film, an unnamed “source with knowledge of the matter” told Reuters on Thursday.

Directed by Henry Selick, the movie was scheduled for release in October 2013, the source said.

Disney chief financial officer Jay Rasulo disclosed the amount of the write-down in remarks to analysts at the Bank of America Merrill Lynch conference. “That will be a very short fourth quarter impact for us,” he said.

Selick directed such animated films as Coraline, James and the Giant Peach and The Nightmare Before Christmas.

Rasulo added that the entertainment giant didn’t get the sort of advertising rebound that it had anticipated over the summer following the Olympics

Profit at Disney’s movie studio leaps to $313M

Walt Disney Studios

Walt Disney Studios

Strong ticket sales to such films as “Brave” helped third-quarter profit at Disney’s movie studio zoom to $313 million from $49 million a year ago.

But studio revenue rose only 0.3 percent to $1.63 billion, off from the $1.77 billion that analysts expected. A major factor was smaller revenue from DVD and Blu-ray disc sales than a year earlier.

Disney reported an overall profit of $1.83 billion ($1.01 a share) for the quarter ended June 30, up from $1.48 billion (77 cents a share) a year earlier. Revenue rose 3.9% to $11.09 billion.

Meanwhile, Walt Disney Company CEO Bob Iger said that attendance at Disney California Adventure made up about half of the visits to its Anaheim, California parks, up from only a quarter in 2011. The increase came shortly after the June unveiling of an overhaul costing at least $1 billion that included the addition of an area based on Pixar’s Cars.

Revenue in the parks and resorts sector was up 9 percent to $3.44 billion, aided by a full quarter of operations of the Disney Fantasy, its newest cruise ship, greater Disneyland attendance and higher ticket prices. Parks results were hurt last year by the earthquake and tsunami in Japan.

Net income for the three months ended June 30 rose 24 percent to $1.83 billion, or $1.01 per share. That beat the 93 cents per share expected by analysts polled by FactSet. Revenue rose 4 percent to $11.09 billion, well short of the $11.32 billion expected by analysts.

Iger said that he thinks Disney’s movie studio will see better results.

“We feel good about our slate. We do believe were going to continue to improve returns on that business led by the franchises and the big brand power of our films,” he said Tuesday in a conference call with analysts.

Barclays analyst Anthony DiClemente said that the studio’s strong results and good expectations for its upcoming lineup are important because movie profits are usually unpredictable.

“It’s the gift that’s going to keep on giving. The more optimistic view is to look at this studio-driven beat as being higher quality than it would normally be,” he said.

Disney’s shares fell 44 cents to $49.39 in after-hours trading. They closed in regular trading up 16 cents at $49.81 before the report.

Disney’s Profit up Despite “John Carter” Disaster

Walt Disney Studios

Walt Disney Studios

Although the Walt Disney Company lost $200 million on its partly animated science-fiction bomb John Carter, the entertainment giant announced Tuesday that its overall profit from January through March grew 21%.

Costing $250 million, John Carter had led to an $84 million operating loss for the movie studio division during the fiscal second quarter. Studio chief Rich Ross stepped down April 13 after the movie disaster. Revenue dropped 12% to $1.2 billion.

Nonetheless, losses at Disney’s movie studio were at the low end of the $80 million to $120 million range that the company had predicted earlier due to the poor results of John Carter.

Quarterly growth at the Mouse House was aided by strong attendance at theme parks and higher advertising revenue at cable networks.

Meanwhile, Disney CEO Bob Iger told analysts that a sequel to the superhero smash hit The Avengers is in development.

In spite of the loss at the company’s studio division, Disney announced second-quarter earnings of $1.1 billion and a 6% revenue rise to $9.6 billion.

Adjusted earnings per share rose 18% to 58 cents. Analysts had expected 55 cents.

Disney’s earnings once again were increased by its media unit, where operating earnings went up 13% to $1.7 billion in the most recent quarter.

California’s Disneyland set a second-quarter attendance record, said chief financial officer. Overall, earnings at the theme park unit jumped 53% to $222 million. Parks and resorts revenue grew 10% to $2.9 billion. Attendance and spending grew in the United States, while overseas parks in Tokyo and Hong Kong experienced gains which were partially offset by a decrease in Paris.

“You’ve got a parks recovery that’s underway, and you have a cable network business that’s best in class. It showed good growth on the top-line,” Janney Montgomery Scott analyst Tony Wible said.

Results for the latest quarter don’t include the huge takings from Avengers, which has already collected $702.2 million worldwide.

Shares Disney rose 75 cents (1.7%) to $45.05 in after-hours trading after results were released Tuesday. Stock has increased 20% since the beginning of the year.

Blue Smurfs don’t keep Sony Corp. out of red ink

Sony  Corporation

Sony Corporation

Despite the popularity of the partly animated “The Smurfs,” Sony Corp. announced Thursday a record annual loss of 457 billion yen ($5.7 billion), marking its fourth year of red ink in a row.

Although sales improved in Sony’s film business — helped by TV shows that it produced and home video sales of movies — profits dropped a bit.¬†The Smurfs and the live-action Bad Teacher helped neutralize the effects of the failure of Arthur Christmas, co-produced with Aardman Animations.

The entertainment and electronics firm, maker of the Spider-Man movies, reported a loss of 255 billion yen ($3.2 billion) for the quarter from January to March. That’s Sony’s fifth straight quarterly net loss. The fiscal year has been the worst in the Tokyo-based company’s 66-year history.

The most recent losses were greater than those in 1995, after Sony made a bad gamble by purchasing Hollywood studio Columbia Pictures.

Worsening the picture for Sony was factory and supplier damage in northeastern Japan, were last year’s earthquake and tsunami caused widespread damage. The flooding in Thailand also caused production disruptions for Sony.

Chief financial officer Masaru Kato believes that entertainment revenue will improve this year with the release of The Amazing Spider-Man, Men in Black 3 and the new James Bond flick Skyfall.

Kazuo Hirai was appointed the company’s president last month, when he said that Sony would cut 10,000 jobs, or about 6% of its global workforce.

Sony shares have lost about half their value over the past year. They fell 1.2% to 1,213 yen during trading Thursday in Tokyo. Trading ended shortly before the earnings announcement.

“Puss in Boots” gives DreamWorks’ earnings a boost

DreamWorks Animation SKG

DreamWorks Animation SKG

First-quarter earnings at DreamWorks Animation SKG Inc. rose slightly in the first quarter as both revenue and costs increased, the studio announced Wednesday.

Over half of its revenue — or $73.6 million — came from overseas ticket sales of its feature film Puss in Boots and its release on home video in the United States. The film grossed about $554 million at the box office worldwide.

Such other recent films as Kung Fu Panda 2 contributed to revenue as well.

Net income in the three months ending March 31 reached $9.1 million (11 cents per share), just up from $8.8 million (10 cents per share) a year ago.

Revenue jumped 26% to $136.1 million from $108.0 million. Analysts polled by FactSet had predicted earnings of 8 cents per share on $132.3 million in revenue.

Revenue costs rose to $96.5 million from $72 million, while DWA paid $5.1 million in income taxes in the first quarter — up by 38% from the same period last year.

Second-quarter and full-year results for DreamWorks Animation are expected to be driven by Madagascar 3: Europe’s Most Wanted, which comes to theaters on June 8. The film will complete with Pixar Animation Studio’s Brave.

However, because of the summer Olympics, Madagascar 3 will be released late overseas, DWA chief financial officer Lou Coleman, said during a conference call.

The studio will release the movie in Australia, Italy, Japan, Spain and the Nordic region by the end of this year, and in the United Kingdom and Germany in 2013.

Coleman believes that the delay will affect both the box office and the DVD release for Madagascar 3. Its distributors will spend more on advertising in the second quarter, he added.

TV revenue from Kung Fu Panda 2 and home entertainment revenue for Puss In Boots will also drive results in the second quarter, the company said.

DreamWorks Animation shares closed up 36 cents (2%) Wednesday at $18.46 on the Nasdaq in the regular session. They rose another 64 cents (3.5%) to $19.10 in after-hours trading.

Shares of DWA have dropped by 10% since it announced a sharp fall in profit in its fourth quarter.

Study: Animated movie projects double their money

Shrek 2

Shrek 2

The 101 animated films released from 2002 through 2011 more than doubled their investment, with average revenues running 108.4% higher than costs.

That’s the conclusion of a study by business researcher SNL Financial, which found that animation has been the most profitable genre among the 1,444 films released in the past decade.

In the animation category, DreamWorks Animation’s Shrek 2 was the winner, with a 462% return on its investment.

Among all films, the best investments came from animated movies budgeted at $90 million to $100 million. The five films in that category had a 292% margin.

SNL Kagan considers a film definititely profitable if estimated revenues from all sources exceed costs by at least 75%. Analysts are unable to assess studio expenditures on such items as negatives, marketing and DVD reproduction. The research firm believes that films with margins under 40% probably lost money.

In the past decade, average worldwide revenues per film were $216.6 million on costs of $133.3 million, prompting a 63% margin.

The second most successful genre — after animation — was science-fiction/fantasy. It was a close race, with the 71 films getting a profit margin of 108.1%. Fox’s Avatar was the most successful, with revenues exceeding costs by 554%.

The 84 family films released over the decade were profitable, making 99% more than costs. Warner Bros.’ Harry Potter And The Deathly Hallows Part 2 was the most successful, with a 444% margin.

Horror, thriller and Western films were, on average, the least successful. Revenues ran only 33% or less ahead of costs.

Worst-off financially were two Westerns budgeted at $50 million or less. Their costs exceeded revenues by 80%.

Shanghai Disney theme park getting $2 billion loan

Shanghai Disneyland

Shanghai Disneyland

The operator of the proposed Shanghai Disney theme park has succeeded in securing a 12.9 billion yuan ($2 billion U.S.) loan for the park’s construction, Chinese media reported Wednesday.

Shanghai Securities News cited Shao Xiaoyun, a vice-president of the Disney theme park operator, Shanghai Shendi Group, as saying that the project will receive two syndicated loan amounts — the first being 12.9 billion yuan.

“The first and second syndicated loans will fulfill the funding needs of the Shanghai Disneyland project and the Shanghai International Tourism Zone,” Shao said.

Tuesday’s loan agreement was signed under a framework agreed on last May between Shendi Group and a group of 12 banks, led by China Development Bank, Shanghai Pudong Development Bank and Bank of Communications, the Shanghai Daily reported.

The city of Shanghai plans to develop a tourism zone around the theme park as well. The theme park is estimated to cost $3.9 billion U.S. Hotels and other facilities will cost another $713 million.

Entertainment giant Walt Disney Co. will hold 43% of the shares of the owner companies. The government-backed Shendi Group will holding the other 57%.

The investment amount will be split between media company Walt Disney Co and the Shendi Group, with Disney holding 43 percent of the shares of the owner companies and government-backed Shendi holding the remaining 57 percent.

Also on Tuesday, Disney announced that it will collaborate with China’s Ministry of Culture and Tencent Holdings on an initiative to promote the country’s animation industry, train local talent, and develop world-standard Chinese content and franchises.

Disney said in a statement that it will provide expertise in creative concept development — particularly story writing, screening, story refining and market research — to the country’s National Animation Creative Research and Development Cooperation. Tencent will give online marketing support.

Little or no investment will be required from the Mouse House, which will enjoy the so-called “first look” at developing material into TV shows or movies for Chinese and international audiences.

DWA shares fall after weak fourth-quarter results

DreamWorks Animation SKG

DreamWorks Animation SKG

DreamWorks Animation shares dropped $1.84, or 9.4%, to $17.81 in afternoon trading Wednesday, the day after the company announced fourth-quarter earnings that fell short of analysts’ forecasts.

The studio said that costs would rise for its two movies being released this year. DWA also warned that DVD sales will be lower.

Shares of DreamWorks Animation SKG Inc. fell by 8% Tuesday, the day that the company announced that fourth-quarter revenue fell 21% to $219 million from $276 million a year ago. That beat the $206 million that analysts had expected.

Net income in the three months ending December 31 reached $24.3 million (29 cents per share), down a whopping 70% from $85.2 million (99 cents per share) a year earlier.

Nearly a year ago, shares reached a 52-week high of $28.50.

The studio blamed much of its profit decline to the fact that it released just two films (Puss in Boots and Kung Fu Panda 2) last year, compared with three in 2010, including the last movie in the Shrek franchise.

Kung Fu Panda 2 provided about $50 million in revenue in the final quarter of 2011, mostly through its Blu-ray and DVD release. Puss in Boots added $24 million, mainly through movie ticket sales and licensing revenue.

Shrek Forever After and How To Train Your Dragon both contributed revenue through holiday home movie sales. Megamind brought in consumer products revenue as well.

DWA said that the two movies it’ll make this year — Madagascar 3 and Rise of the Guardians — will cost about $145 million each, above the usual $130 million. The studio attributes most of this to longer production times and higher infrastructure costs. The theatrical release of Madagascar 3 in June is expected to be the next big event for DreamWorks Animation.

Company CEO Jeffrey Katzenberg warned analysts that DVD sales are still dropping in comparison to the corresponding film’s domestic box office receipts. The fourth quarter revealed “challenges for the industry as a whole,” he added. For one thing, he said, movie fans are renting more and trying Netflix and other alternatives.

Doug Creutz, an analyst with Cowen & Co., observed that studio revenue beat expectations in part because of a licensing agreement with Netflix.