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'Mars Needs Moms' drags down Disney's earnings

The entertainment giant posts net income of $942 million in its fiscal second quarter, down 1% from a year earlier. Revenue rises 6% to $9.1 billion.

May 11, 2011|By Dawn C. Chmielewski, Los Angeles Times

The box-office bomb that was "Mars Needs Moms" left collateral damage on Walt Disney Studios' bottom line, causing the film group's performance to lag in its fiscal second quarter.

The movie division recorded operating income of $77 million for the three months ended April 2, a 65% drop from the same time a year earlier, when it released the blockbuster "Alice In Wonderland." Disney said the poor theatrical performance of "Mars Needs Moms" caused it to take a higher film write-down in the quarter. The 3-D animated movie that Disney spent $150 million to produce and tens of millions more to market managed just $36.7 million in global ticket sales.

Disney Chief Financial Officer Jay Rasulo said the "very disappointing performance" of "Mars Needs Moms" reduced the studio's income by $70 million in the quarter.

Poor results from its studio unit contributed to lower results for the Burbank entertainment giant. Walt Disney Co. on Tuesday reported net income of $942 million, down 1% from a year earlier. Revenue rose 6% to $9.1 billion from $8.6 billion in the quarter last year.

The Japanese earthquake and tsunami affected results for Disney's parks group, which reported a 3% drop in operating income to $145 million. The March disaster forced the temporary closure of the Tokyo Disney Resort, resulting in a $25-million reduction in operating income. Promotions around the January launch of Disney's third cruise ship, Disney Dream, together with higher fuel costs, also dragged down results, as did the timing of the Easter holiday.

Disney's interactive group's financial performance worsened in the quarter compared with a year earlier. The division reported a loss of $115 million, which it attributed to $34 million in accounting charges related to its acquisition of social gaming company Playdom, as well as costs associated with developing games for mobile devices and online virtual worlds.

Continuing to buoy the company's results, Disney's media networks group, which includes its broadcast and cable TV holdings, saw its operating income rise 17% to $1.5 billion, thanks to a bump in advertising revenue at ESPN and gains in subscribers and fees for Disney Channels Worldwide. The broadcast group also saw ad gains for the ABC network and its TV stations.

At the film studio, the company already has taken a loss on shutting down Robert Zemeckis' Marin County special-effects operation, ImageMovers Digital, whose motion-capture technology was used to create "Mars Needs Moms" and "A Christmas Carol." Disney also has deep-sixed a planned Zemeckis project, "Yellow Submarine," a retelling of the 1968 Beatles cartoon.

"Mars Needs Moms" was Disney's second box-office flop in the last two months.

"Prom," a modestly budgeted film that cost $9 million to make, opened April 29 to a paltry $4.7 million in domestic ticket sales. Its business dropped off 53% last weekend. The results fell well short of the studio's initial projections for the movie about high school's big night, according to two people with knowledge of the matter. "Prom" was the first original film project to be given the go-ahead for production by studio Chairman Rich Ross.

The results from "Prom" will be included in Disney's next quarterly report.

Disney shares closed up 81 cents, or 1.9%, at $43.91, before the release of the earnings report. They fell $1.19, or 2.7%, to $42.72 in after-hours trading.

However, Wall Street investors seem largely unconcerned about the performance of Disney Studios given the potential strength of its summer movie lineup. "Pirates of the Caribbean: On Stranger Tides," the fourth installment of the popular series, is expected to be the first of the summer movies to open with more than $100 million in ticket sales May 20. That release will be followed June 24 by Pixar Animation Studios' highly anticipated sequel "Cars 2."

"We are excited about our four big summer releases, starting with 'Thor,' which opened domestically last Friday," Disney Chief Executive Robert A. Iger said.

dawn.chmielewski@latimes.com

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