Disney's profits slump

BURBANK — Walt Disney Co. had little to offer in the way of good news to a battered media industry this week after it announced a 46% drop in second-quarter earnings compared with last year.

Poor DVD and home entertainment sales, slumping resort and amusement park attendance and falling ad revenue from its broadcasting division all contributed to the weak performance, according to the Burbank-based company.

And adding stress to an already soft production market, Disney is also planning to open a new animation studio in Vancouver, Canada, according to reports from various news organizations.

The developments could further limit the opportunities for entertainment-related businesses in Glendale and Burbank, experts said.

“A lot of entertainment workers live around our region, and so if there's not a lot of production work, then they're directly affected,” said Don Nakamoto, labor market specialist for the Verdugo Workforce Investment Board.

The financial health of the studios has a major impact on even non-entertainment-related fields in Glendale and Burbank, Nakamoto said, because of the amount of business generated by people who work in the field.

“When people lose jobs in that industry, then a lot of their economic impact is also eliminated,” he said. “Entertainment workers are one of the highest compensated workers in any industry, and so they spend a lot of money locally, and it helps sustain restaurants and retail companies locally. The whole economy, or at least a big portion of it, is built around the entertainment industry.”

Businesses in both cities that are structured to serve the major film studios with local operations have reported steep declines in business since the start of the year.

Entertainment studios had squeezed in much of their productions in the fall, anticipating a standoff with the Screen Actors Guild, which has yet to finalize a new contract agreement with the studios.

Business at Big Screen Cuisine, which caters at movie and television shoots for all major studios, has fallen about 70% since the start of the year, said Michael Glick, part-owner of the Burbank business.

Glick has since cut his staff from 20 employees to four, he said.

The problem has grown out of studios growing cautious with their expenses, opting to film movies out of state, or turning to reality TV instead of dramatic or comedic series, which would typically call for more catering services, he said.

“It's been terrible,” Glick said.

Disney's apparent move to locate some operations in Vancouver, combined with its poor earnings, would likely produce fewer opportunities for businesses like Big Screen Cuisine, he said.

“It's pretty slow, so we'll know at the end of this year whether or not I'm staying [in business] or not, that's for sure,” he said.

Other businesses were suffering because of the woes of Disney and other studios, including Glick's produce suppliers, he said.

Burbank-based Foam Mart, which makes foam for sound stages, special effects tables and studio sets, has seen business with area studios drop 50%, owner Andrea Weiss said.

About 40% of the company's total business comes from studios, with Disney making up a major portion of that through the purchase of puppets and other materials for its theme parks, Weiss said.

“In general, the industry as a whole, it does affect us,” she said.

Things may get brighter if an agreement with the SAG comes soon, or if there are more incentives for film productions to be here, rather than in other states or countries, Nakamoto said.


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