Disney ‘Hard at Work’ on Apps for Mobile Devices, CEO Iger Says

The company launched a WatchESPN app for Comcast subscribers on Tuesday and will launch apps for subscribers of the Disney Channel in June, Iger said. Such apps help “protect the value of that product to the distributors and increases the value of the product to the subscribers,” he said. The apps also give Disney “additional opportunities to either up-sell other product or to sell advertising in certain cases,” he said. Iger said he couldn’t yet give an estimate on “just what the upside could be, but we clearly believe that we're going to increase engagement with our programming on multiple fronts.”

Disney was seeing a “dramatic increase in the time and money spent, particularly among our core demographic, on mobile platforms,” Iger said. Mobile platforms will “continue to penetrate the market more profoundly, particularly outside” the U.S., he predicted. Iger also said he didn’t think availability of TV content via Netflix and on mobile platforms was hurting traditional TV viewing of its content. Sanford Bernstein analyst Todd Juenger said it seemed “likely” that Disney “will renew” its pact with Netflix.

Disney’s been “aggressive as a company at being present on new platforms because we believe that, by and large, they create incremental revenue opportunities and they, by increasing engagement … increase viewer interest in our programs and relevance,” Iger said. But Disney has managed its presence on these platforms “very carefully” because the digital media business was “still nascent and certainly dynamic,” he said. “It’s changing right before our eyes. What we believe we've done is to strike a pretty good balance between protecting” Disney’s traditional business and platforms and “taking advantage of new opportunities on new digital platforms,” he said.

The company’s goal for its Interactive Media business continued to be to make it profitable in 2013, Iger also said. That was reflected in Disney’s results for Q2 ended March 31 and “will be reflected” for all of 2012, “where we continue on the path to deliver that,” he said. Disney was taking a “dramatic step” to achieve the goal in 2012 and “we're not abandoning” the goal, he said. To help achieve it, Disney reduced investment in console games and increased investments in lower-cost social and mobile games. Social and mobile games are “relatively inexpensive” to make, Iger said.

The operating loss in Disney Interactive Media fell 39 percent from Q2 last year to $70 million thanks to improved results in Disney’s game business, said Chief Financial Officer Jay Rasulo. The company singled out improved results in console and social games in its earnings news release. Interactive Media revenue grew 13 percent to $179 million. The improved console game results were “primarily due to lower product development costs, partially offset by a decline in console game sales, which reflected fewer titles in release” than a year ago, Disney said. Social games results “benefited from the lower impact of acquisition accounting” at Playdom and higher revenue from Gardens of Time for Facebook, Rasulo said.

Total Disney Q2 revenue grew 6 percent from Q2 last year to $9.6 billion. Profit grew to $1.1 billion, or 63 cents a share, from $942 million, or 49 cents a share. Improved results in Interactive Media and other Disney divisions helped offset weaker results in Studio Entertainment, where revenue fell 12 percent to $1.2 billion and it posted an operating loss of $84 million compared to a $77 million operating profit in Q2 last year. The weaker performance in movies was due mainly to the poor showing of the theatrical release John Carter, Disney said.