Film studio boosts earnings at Disney

Walt Disney Co.’s film studio drove the entertainment giant to an 8% increase in profit for its fiscal fourth quarter. And the company is going to bet even bigger on franchise movies in the coming years.

Disney Chairman and Chief Executive Robert Iger said the film unit plans to release 21 tent-pole movies in the next three years, up from the 13 it released over the last three years.

Among those movies would be “Captain America,” “Thor” and “The Avengers” sequels from Marvel Studios, Pixar’s “Toy Story 4,” and the relaunch of the Lucasfilm “Star Wars” franchise with 2015’s “Star Wars: The Force Awakens.”

All of those pictures would come from companies that Burbank-based Disney spent billions of dollars to acquire in the last decade.

Analyst Robin Diedrich of Edward Jones Research said it’s far from a “no-brainer” to ramp up the production of expensive, hoped-for blockbusters. But it makes sense given Disney’s recent strong performance at the box office.

“It is certainly not a slam-dunk,” she said. “[But] they feel very confident.”

Disney posted a net income of $1.5 billion for the quarter that ended Sept. 27, up from $1.39 billion a year earlier.

The company delivered earnings of 89 cents a share, just beating analyst expectations of 88 cents, according to investment research firm Zacks.

Revenue rose 7% to $12.39 billion.

The studio was the star of the show, with operating income surging to $254 million from $108 million a year earlier. Revenue for the unit rose 18% to $1.78 billion.

Disney released a major hit during the quarter: “Guardians of the Galaxy,” a surprise blockbuster about a ragtag group of superheroes that has grossed $766.3 million worldwide since Aug. 1. And “Frozen,” the animated powerhouse Disney released in November 2013, continues to be a moneymaker, driving the studio’s worldwide home entertainment business.

Disney, the world’s largest entertainment and media company, has not released a major disappointment since “The Lone Ranger,” which opened in 2013 and was a drag on the studio unit’s performance during that year’s fiscal fourth quarter.

The studio’s strong quarter, which included almost the entire summer moviegoing season, came as competitors suffered through a difficult stretch.

Last week, Sony Corp.’s film division reported a loss for the summer months. In October, Comcast Corp.’s Universal Pictures said revenue was down 15% on lower box-office results.

“Even the most optimistic analyst couldn’t have predicted how this quarter came in for [Disney’s] studio,” said Tuna Amobi, an analyst at S&P Capital IQ.

Disney chief Iger began a conference call with analysts Thursday by outlining the studio’s forthcoming slate, and took a moment to mention the “exciting footage” he saw on a recent visit to the set of the new “Star Wars” movie in London.

“While there is no sure thing in a creative business, we believe the proven appeal of our brands and franchises reduces risk and maximizes our unique ability to create significant long-term value by leveraging successful content across our diverse array of businesses,” Iger said.

Diedrich said that Disney has been particularly adept at exploiting its successful films in other areas.

“Frozen,” which has grossed $1.28 billion worldwide, is a prime example.

The film spawned a hit soundtrack, will become a Broadway musical and is paying major dividends on the consumer products front. Disney said this month that more than 3 million “Frozen” role-play dresses have been sold by North American retailers.

“The thing that we like about the whole ecosystem at Disney is that when they have these hits that resonate, they take them into their theme parks, onto Broadway — what have you,” Diedrich said. “They can really capitalize.”

On the television front, Disney’s media networks division posted operating income of $1.44 billion, down less than 1% from the year-earlier period. Revenue rose 5% to $5.22 billion.

Within the division, the cable group’s operating income was down 1% in part because of higher programming costs at ESPN.

Disney said that the increased costs were “driven by contractual rate increases for Major League Baseball, NFL and college football rights,” among other factors.

The broadcasting group’s operating income was up 3%, partly because of affiliate revenue growth.

Disney’s parks and resorts unit posted operating income of $687 million, a gain of 20% from a year earlier. The company said the strong performance was partly because of increased guest spending at its domestic properties.

The company’s consumer products division posted operating income of $379 million, compared with $347 million a year earlier. Revenue was up 7% to $1.07 billion.

Disney’s interactive division reported operating income of $18 million, up 13% from a year earlier. Revenue was down 9% to $362 million. Disney attributed the division’s higher operating income to the success of the mobile game “Tsum Tsum.”

The company also reported record-breaking fiscal 2014 earnings on Thursday. Profit surged 22% to a $7.5 billion for the year, and revenue surged 8% to $48.8 billion.

Disney shares rose $1, or 1.1%, to $92 on Thursday. The stock was down about 2% in after-hours trading.

Twitter: @DanielNMiller

Staff writer Meg James contributed to this report.