Walt Disney (DIS) reaps the rewards of being the largest U.S. media conglomerate and the world’s biggest theme park operator. It makes movies; owns some of the world’s iconic characters, including Mickey Mouse and Donald Duck; and owns resorts.
Disney’s media networks account for more than half of its operating profit. It owns ABC, ESPN, and the Disney Channel. The company also has a 42.5 percent stake in A&E, The History Channel, and Lifetime Networks. ESPN represents one of the company’s most valuable assets, generating 75 percent of cable network sales, according to Morningstar.
Disney products clearly appeal to people of all ages, ethnicities, and walks of life. That ranges from school children who want to visit Disneyland and Disney World to adults who spend their evenings watching ESPN and Lifetime.
Since its founding by brothers Roy and Walt Disney in 1923 as a cartoon studio, the company has had a solid business model.
Disney’s profit dipped 1.2 percent in the fiscal second quarter ended April 2, to $942 million from $953 million a year earlier, trailing estimates. Revenue increased 5.8 percent to $9.08 billion from $8.58 billion, again failing to meet forecasts.
But temporary factors accounted for the profit slide — a rare dud in theaters with “Mars Needs Moms” and a drop in revenue at Disney’s Tokyo resort thanks to the earthquake and tsunami in March.
Areas of strength
Sales for Disney’s media networks gained 12 percent to $4.32 billion, thanks to strong advertising and affiliate revenue. Profit rose 17 percent to $1.52 billion for the networks. Cable profit gained 15 percent, while ABC’s surged 36 percent.
Disney’s “renowned brands offer a strong competitive edge to the company and bolster its well-established position in the market against major players like News Corp. (NWSA) and Time Warner (TWX),” write analysts at Zacks Investment Research.
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