Disney Q2 Interactive Revenue ‘Significantly Better’ Than Forecast on Strength of ‘Infinity’

Disney is looking at more ways to tap into the success of Frozen, the highest-grossing animated film of all time and the best-selling title ever released on Blu-ray, said CEO Bob Iger on an earnings call Tuesday. The company is studying “other forms of storytelling,” including interactive, he said. Studio Entertainment operating income for fiscal Q2 jumped more than 300 percent to $475 million, primarily on the domestic home video release of Frozen, said Chief Financial Officer Jay Rasulo.

Results in Disney’s Interactive segment were “significantly better than we anticipated” when the company reported Q1 results, Rasulo said. The unit has been profitable for three consecutive quarters, he said. Interactive revenue for Q2 increased 38 percent to $268 million from the year-ago quarter, and operating results for the segment swung to a profit of $14 million from a loss of $54 million, driven by the strength of Infinity, which launched in Q4. Improved Interactive results in the quarter also owed to growth in the company’s Japan mobile business on higher licensing fees from games sales, subscribers and handset sales, the company said.

Iger said in Q&A the company is looking for growth from consumption of new media platforms, including short- and long-form entertainment. Iger cited the recently launched Disney Movies Anywhere app that allows users to buy and play new Disney movies within an iTunes app or to stream content purchased via iTunes without downloading it again on a mobile device. Disney plans to grow the consumption of media on mobile platforms including smartphones and tablets.

Commenting on Disney’s recent distribution agreement with Dish Network (CED March 5 p14), Iger said “the bet that’s being made” is that the offering for ABC, ESPN and Disney content has the potential to “attract people who may not have already signed up for multichannel service” and get them to “sign up for something instead of nothing.” He called the offering “complementary to the pay-TV model,” comparing it to Disney’s Watch apps.

Iger said it’s Dish’s responsibility to “get critical mass from a program perspective” for the service to take off. “We don’t intend to participate in that pursuit at all,” he said. He called the initiative a “smart thing to do” and “something that we should certainly try.” On whether the Dish deal is critical to business, he said, “No, but it’s certainly critical that it gets critical mass from a programmer’s perspective in order to bring it to market.” Disney is open to working out similar deals with other distribution partners “but we have not engaged in any of those discussions yet,” he said.

Disney reported Q2 revenue of $11.6 billion, compared with $10.6 billion in the year-ago quarter. Earnings grew to $1.9 billion from $1.5 billion in Q2 2013, it said. Shares closed down 0.9 percent to $80.29.