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Disney rules out big Internet partnerships

Disney rules out big Internet partnerships

Disney said it was unlikely to enter into any “broad, sweeping partnerships” with Internet portals such as Google or Yahoo as it builds its Internet business.

“Our opportunities are pretty significant without them,” said Robert Iger, the company’s chief executive, citing its strong brands and its advertising network.

Mr Iger’s comments come as content producers, such as Disney, are attempting to flex their muscles in a broader industry negotiation with the dominant portals and technology companies that control much of the distribution on the Internet and emerging digital devices, such as the iPod.

This week, Viacom’s MTV Networks unveiled a potentially groundbreaking agreement with Google in which it will supply its video clips to hundreds of smaller websites and blogs affiliated with the Internet company. The two companies will then share associated advertising revenue.

While Disney would not rule out distribution agreements, it stressed a desire to exert a stronger control over its content, and better terms in the resulting business opportunities. “One of the big issues we have is who controls the advertising and who controls the customer,” Mr Iger said.

Disney drew its line in the sand as it announced a 39 per cent increase in third quarter profits. For the quarter, Disney posted net income of $1.13bn, or 53 cents per share, compared with $811m, or 39 cents per share, during the same period a year ago. Those earnings included a $30m contribution from Pixar, the animated film studio that Disney acquired earlier this year. Overall, revenue jumped 12 per cent to $8.62bn.

While they remain comparatively small, Mr Iger expressed particular enthusiasm over the more than $500m in Internet revenues that the company generated during the quarter – excluding online reservations for its theme parks. “It’s just the tip of the iceberg,” he said.

Disney is hoping to improve on that by rolling out a new website in 2007 that will include more video and community applications, Mr Iger said. It is also planning to invest more money to create its own videogames as opposed to licensing them from third parties.

One of the best performers was the film studio, where revenues increased 17 per cent to $1.7bn, fuelled by Cars and home video sales of The Chronicles of Narnia.

Disney has been struggling to raise profitability at the division, and last month announced plans to lay off nearly a quarter of its workforce and focus more of its resources on Disney-branded films that appeal to families and can spawn sequels and consumer products.

In its theme park division, revenues rose 11 per cent to $2.7bn, pushed up in part by higher ticket prices. However, Tom Staggs, Disney’s chief financial officer, predicted that attendance would be flat in the current quarter, and warned that consumer confidence and the state of the economy could affect performance next year.

One weak spot for Disney was its broadcast television network, where operating income fell $70m to $183m as a result of higher programming costs. Mr Iger also acknowledged the “disappointing” performance of the ESPN-branded mobile phone service it introduced with great fanfare earlier this year. To try to boost sales, it has slashed prices and offered a new handset, among other changes. “We’re going to continue to evaluate this very carefully,” Mr Iger said.

In a sign of Disney’s desire to focus more resources on new media, it announced that it expected to sell its 50 per cent stake in US Weekly, the celebrity magazine, to Jann Wenner for about $300m.


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