Disney's first fiscal quarter (ending Dec. 27, 2008) resulted in a 32 percent drop in net income and an 8 percent drop in revenues.
"We faced a challenging first quarter with many of our businesses impacted to various degrees by the economic downturn," said Robert A. Iger, Disney's president and CEO. "We are forcefully confronting current circumstance while investing in the great creativity, brands and assets that are Disney's strengths and keys to its long-term success."
Studio Entertainment revenues for the quarter decreased 26% to $1.9 billion and segment operating income decreased 64% to $187 million.
Lower segment operating income was primarily due to decreased DVD unit sales at worldwide home entertainment reflecting the strong performance of PIRATES OF THE CARIBBEAN: AT WORLD'S END, HIGH SCHOOL MUSICAL 2, JUNGLE BOOK Platinum Release and RATATOUILLE in the prior-year quarter and lower catalog sales in the current quarter. Key current quarter releases included WALL-E, SLEEPING BEAUTY Platinum Release, TINKER BELL and THE CHRONICLES OF NARNIA: PRINCE CASPIAN.
Disney's report was the first of a week that will see likely bad numbers from Time Warner and News Corp, among others.
Operating income at Cable Networks decreased $69 million to $517 million for the quarter driven by decreases at the domestic Disney Channels and at ESPN. The decrease at the domestic Disney Channels was due to lower DVD sales reflecting the success of HIGH SCHOOL MUSICAL 2 in the prior-year quarter. The decrease at ESPN was primarily due to lower advertising revenues and higher programming and administrative costs, partially offset by higher affiliate revenue.
The decrease in advertising revenues was due to a decrease in sold inventory, partially offset by higher rates. Higher programming costs reflected increased costs for NFL programming. The increase in affiliate revenue was due to higher contractual rates and, to a lesser extent, subscriber growth.
Operating income at Broadcasting decreased $205 million to $138 million for the quarter primarily due to lower advertising revenue at the ABC Television Network and at the owned television stations and a bad debt charge in connection with the bankruptcy of a syndication customer. These decreases were partially offset by lower programming costs at the ABC Television Network due to a lower cost mix of programming including a shift of hours from primetime to news. The decrease in advertising revenues at the ABC Television Network was primarily due to lower primetime ratings.
Parks and Resorts revenues for the quarter decreased 4% to $2.7 billion and segment operating income decreased 24% to $382 million. Lower operating income was due to decreases at the domestic operations and at Disneyland Resort Paris.
Lower operating income at the domestic operations reflected a decline in attendance and occupied room nights at Walt Disney World Resort and Disneyland Resort, mark to market adjustments on fuel hedge contracts and labor and other cost inflation, partially offset by cost mitigation activities. At Disneyland Resort Paris, lower operating income reflected a decrease in real estate sales, labor cost inflation and higher marketing and sales costs, partially offset by increased attendance.
Consumer Products revenues for the quarter increased 18% to $773 million, and segment operating income decreased 8% to $265 million. The revenue increase was due to the acquisition of the Disney Stores North America. At merchandise licensing, earned royalty revenue was comparable to the prior-year quarter.
The decrease in operating income in the quarter was due to lower results at our retail business, including the absence of royalties from the former licensee of the Disney Stores North America, and higher selling and administrative costs.
Interactive Media revenues for the quarter increased 13% to $313 million and segment operating income decreased $58 million to a loss of $45 million.
Lower segment operating income was primarily due to a decline at Disney Interactive Studios as higher sales volume was more than offset by an increase in unit cost of sales and higher marketing expenses in the current quarter.
