Disney's Great Quarter

Disney reported a healthy quarter ending January 2nd, beating forecasts. The entertainment conglomerate earned 47 cents per share, much better than the 38 cents per share expected by a poll of analysts by Thompson Reuters. Entertainment is typically an industry that suffers greatly in a recession. So how did Disney manage to defy that logic with a net income of $844 million at the end of 2009?Given the fact that most economists think the U.S. is on the cusp of (an albeit slow) recovery, this result might not be that shocking after all. In fact, its most impressive performance came from its advertising revenues. CNN/Money reports:

Disney's largest division -- TV networks including ESPN and ABC -- rebounded due to higher ad sales, with revenue rising 7%.

But Disney wasn't alone here:

Higher broadcast and cable ad sales also helped rivals News Corp and Time Warner Inc. beat earnings expectations last week.

Advertising tends to lead economic recovery, since companies don't want to miss out on rebound spending. So it's not surprising that advertising showed improvement. Analysts must have been caught off guard with the extent to which companies were willing to spend on advertising again. Of course, this was in the latter part of the year, so it makes me wonder whether this was mostly a desperate attempt to capture the holiday shoppers, instead of a strong belief that the economy is about to enter a resilient recovery. But the quarter was seemingly less magical for a large segment of Disney's business. CNN/Money notes:

Revenue in the company's movie studio and theme parks, which account for about half of Disney's total revenue, were nearly flat.

No fireworks there, though I'd assert that even keeping revenue flat is pretty impressive in this economic climate for movies and theme parks. Entertainment and vacations are some of the first luxuries cut as Americans scale back their spending. But this performance shows the power of the Disney brand. When consumers are spending on movies and vacations, they're still choosing to do so with Disney. That's why, in a sense, I almost find the flat result of this portion of Disney's business more impressive than its 7% rise in advertising revenue.

This article available online at:

http://www.theatlantic.com/business/archive/2010/02/disneys-great-quarter/35670/