The Walt Disney Company (DIS) is one of the most recognizable brands in the entertainment industry and the company owns a host of brands with similar reputations. Disney's challenge is to generate more revenue and profits in the modern, streaming, digital world. Of Disney's five operating segments, only its Interactive Media unit lost money during the first half of fiscal year 2011.
As a step in the streaming direction, Disney CEO Bob Iger announced at a recent conference that the company would be revamping the Disney.com web site over the next year to include paid and streaming content. Iger stated the new site would be the place for customers to learn about all things Disney and be able to buy products and content on the site.
That would put it right in the path of streaming competitors such as Netflix (NFLX) and Hulu, a joint venture of broadcasters NBC (CMCSA) and Fox (NWSA), and, to a degree, in competition with Google’s (GOOG) YouTube and Apple (AAPL), all of which have designs on controlling content online.
For the first half of the fiscal year ended April 2, Disney revenues increased to $19.8 billion, up 8 percent from $18.3 billion in 2010. Net income per share increased to $1.16 per share from 92 cents in the earlier half-year, a 25 percent improvement. The Wall Street consensus earnings estimate for the full year is $2.56, compared to the $2.07 the company earned in 2010.
The Media Networks segment, which includes ABC, ESPN, and Disney Channel, contributes approximately 45 percent of Disney revenues and chipped in 72 percent of operating income for the first half. The Parks and Resorts segment contributed 28 percent of revenues and 15 percent of profits. Studio Entertainment revenues and earnings can be volatile, based on the hit or miss of Disney-produced movies. Consumer Products is a profit machine, contributing 11.5 percent of operation income out of less than 8 percent of revenues.
Richard Greenfield, media analyst for BTIG, questions whether Disney has a well thought out strategy in the interactive gaming sector. He noted the company has spent over $1 billion buying interactive companies over the last four years and generated losses of similar amounts from the company's Interactive Media division.
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