Disney Posts Dismal Earnings

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The Walt Disney Co. capped a bad year with a dismal fourth quarter as
earnings fell 68 percent.

The numbers proved just how big the impact of the Sept. 11 attacks was on the
media and entertainment conglomerate.

Disney, with its broadcast and cable channels, has been hit hard by the
downturn in the advertising market.

But its theme-park division has smarted equally because of the precipitous
drop in air travel since the terrorist attacks. And the picture is not looking
any brighter for the near term, the company told analysts on a conference
call.

In a prepared statement, Disney said operating income for the fiscal first
quarter ended Dec. 31 could be down as much as 50 percent because of the
advertising decline.

'The soft advertising market is likely to continue well into 2002,' Disney
president Robert Iger said during the call.

Revenue for the fourth quarter was down 4.8 percent to $5.8 billion from $6.1
billion, and net income plunged to $53 million from $116 million a year ago.

At the media networks, revenue was down 3 percent to $2.17 billion, mainly
because of advertising declines and increased costs at the ABC Television
Network.

Operating income at the media division fell 12 percent in the period to $348
million, also due to decreases at ABC.

Disney's cable networks -- including Disney Channel, ESPN and start-up
channels Toon Disney and SoapNet -- actually posted increases in the quarter,
but they were not enough to offset ABC's dismal results.

For the period, cable-network revenue grew 8 percent to $1 billion and
operating income climbed 25 percent to $264 million. However, broadcast-TV
revenue was down 11 percent and operating income tumbled 55 percent in the
period.

On the conference call, Disney chairman Michael Eisner tried to convince
investors that despite the downturn, the company has not lost sight of its goals
and it was working hard toward shoring up operations by slashing costs and
finding new sources of revenue.

On the call, Eisner said ABC is Disney's 'most important point of focus.'

'We are driving a number of initiatives to improve the economics of the
network business overall,' he said. 'These include changing the model from a
single- to a dual-revenue stream; eliminating station compensation; developing
lower-cost and dual-purpose programming; and changing our relationships with
media buyers to leverage ABC and our other media properties.'

Disney's most recent acquisition, Fox Family Worldwide Inc., will likely be
the main repurposing vehicle for ABC. Fox Family Channel, renamed ABC Family,
will complement its existing adult and kids' programming with repurposed ABC
fare, Eisner said.

It was unclear at press time how many Fox Family employees would make the
transition to the network, which was expected to showcase a new on-air logo Nov.
10.

Disney stock fell 54 cents to $18.30 per share in early trading
Friday.

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