• by Wayne Friedman , May 9, 2007

Walt Disney posted a healthy 27% improvement in net income in its second quarter, led by gains across its media networks and consumer-products divisions. But the flip side was that the company slightly missed Wall Street's revenue estimates--coming in at $8.07 billion, just under predictions of $8.1 billion.

Revenues at its biggest business segment, media networks, were virtually flat at $3.5 billion, versus the same period in 2006. At the same time, operating income at its media networks climbed 21%--33% at ABC and 19% at its cable networks, primarily from ESPN and its international Disney Channels.

At ABC, revenues fell some 7% to $1.7 billion, due primarily to the fact that the network didn't have the Super Bowl, or three New Year's Day college bowl games that were aired by Fox. Lower second-quarter prime-time ratings were offset by higher pricing and more sold commercial inventory, the company said.

ESPN made gains during the period, thanks to higher affiliate revenues, higher advertising sales and lower costs coming from the fact that ESPN had one less regular season NFL game.

When asked about possible TV writers strike later this year, Robert Iger, Disney CEO, said: "There is a lot of posturing going on. The studios are definitely gearing up for a work stoppage."

Disney consumer products grew 14% to $516 million in revenue and 20% in operating income to $125 million because of good sales of "Cars" merchandise. Revenues also climbed from Disney Interactive Studios, its video games division. However, Disney's studio entertainment division was down 13% to $1.6 billion due to lower comparable box-office numbers versus a year ago, with strong theatrical revenues from "The Chronicles of Narnia: The Lion, The Witch and The Wardrobe" and "Chicken Little." But Disney was able to see improvement in operating income--up 60% in the second quarter.

Concerning comments made by Comcast COO Steve Burke at the NCTA conference in Las Vegas on Monday--that the movie studios should let cable operators sell theatrical movies on a day and date basis--Iger said: "We are going to continue to track trend consumer behavior. It's safe to assume that the VOD business is likely to grow. [But] we are not in discussions to sell movies to cable in the same window as theatrical."

Disney's parks business climbed 19% in operating income to $254 million from growth at all of its parks, which offset declines at Hong Kong Disneyland.