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Disney Prospers Despite ABC Drop

Strong performance at Disney’s cable networks, movie studios and theme parks helped to offset sharp declines at its ABC broadcast network in the company’s fiscal third quarter ended June 30.

Disney reported revenue growth of 12% to $8.6 billion and a 39% boost in net income to $1.1 billion (53 cents per share).

At its cable networks, including ESPN and Disney Channel, revenue rose 12% to $2.6 billion and operating income was up 15% to $969 million.

At its studio-entertainment unit, revenue rose 17% to $1.7 billion and operating income increased 18.3% to $284 million, boosted by strong box-office results for animated feature Cars and DVD sales of The Chronicles of Narnia: The Lion, the Witch and the Wardrobe.

At its parks and resorts unit, revenue rose 11% to $2.7 billion and operating income increased 26% to $569 million on growth in its domestic resorts and at Disneyland Resort Paris.

Higher programming costs, an increased number of pilots and costs due to the launch of its Disney-branded mobile-phone service helped drive to down operating income at its broadcast unit by 28% in the period. Broadcasting revenue was up 8% to $1.6 billion for the quarter.

On a conference call with analysts, Disney CEO Bob Iger said initial sales of its ESPN Mobile phone product have been disappointing, but the company was not ready to pull the plug just yet.

“The results, at least initially, were disappointing, and we’re monitoring this very carefully,” he added.

Iger said Disney has had discussions with Internet aggregators Yahoo! and Google regarding broadband video, but deals are difficult because they want too much control. He added that Disney’s online opportunities are significant on its own without having to reach an agreement with Google or Yahoo!.

“One of the big issues that we have when we enter into these discussions is who controls the advertising and who owns the customer,” Iger said. “We believe that because of the strength of our brands and the strength of our creativity, we have opportunities to do both -- we don’t necessarily have to share with any third parties either our advertising revenue or our relationship with the customer.”

He continued, “And while we believe there are opportunistic ways that we can get involved with all of the portals in more specific or narrow ways, I don’t think you should really think that we’re going to end up in a broad, sweeping partnership with one, because our opportunities without them are pretty significant.”