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.