Network Continues to Struggle, as Revenue Slides 9%

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LOS ANGELES ( -- Despite problems with its TV network unit ABC, Walt Disney Co. movedĀ  into the black in the second quarter, posting $259 million in net earnings compared to a $449 million loss the year before.

But overall Disney's quarterly revenue dropped 2% to $5.9 billion vs. $6 billion the year before due to continued trouble in the travel industry that is affecting its theme parks and from the still-weak advertising market hurting ABC.

Disney's earnings of 13 cents per share was higher than the 10 cents per share average analysts estimates polled by Thomson Financial/First Call. Disney's $5.9 billion revenue was also higher than the estimated revenue of $5.6 billion.

Resurrecting ABC
Walt Disney's chairman-CEO, Michael Eisner, said in a statement the company was focusing on resurrecting ABC, which has 29 new pilots competing for spots on the network's upcoming fall schedule. For the quarter, broadcasting revenue fell 9% to $2.2 billion, and operating income slid 39% to $309 million.

The company cited ABC's continued "make good" problems (ABC's ratings have dropped, and so the network has had to give advertisers commercial time in return), which leaves ABC without any inventory to sell. But Disney also noted that the advertising market seems poised for a small turnaround -- especially focusing on a significant upturn in scatter pricing. It also said advertising revenue during the period was hurt at ESPN because of money siphoned away to rival network NBC's coverage of the Salt Lake City Winter Olympics.

Theme parks and resorts revenues decreased 8% to $1.5 billion and operating income fell 15% to $280 million all from the continued problems in the travel business. Consumer products revenues for the quarter increased 1% to $580 million; operating income decreased 5% to $86 million.

Movie business
Disney's film business improved 2% to $1.6 billion -- but operating income dropped to $27 million from $164 million.

The company said marketing costs from films such as Snow Dogs, The Rookie and Return to Never Land had to be accounted for during this period. But it anticipates these movies, with average production budgets of $30 million, should eventually earn collective net profits of $150 million.

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