DARK TIMES AT DISNEY BOX OFFICE BOMBS LEAD TO LOSS.

Byline: Greg Hernandez Staff Writer

BURBANK - A $313 million loss in The Walt Disney Co.'s film unit was largely blamed for the 27 percent drop in fourth-quarter profit reported by the company Thursday despite Disney's television and theme park divisions posting impressive gains.

For the quarter ending Sept. 30, Disney's net income fell to $379 million, or 19 cents per share from $516 million, or 25 cents a share, in 2004. Stock option expense and several one-time charges also contributed to the decrease in profit.

Meanwhile, revenue grew to $7.7 billion, up slightly from $7.5 billion a year earlier.

Disney's film division lacked a major summer hit with the thriller ``Dark Water'' bombing and a series of releases from its Miramax Films specialty label including ``The Brothers Grimm,'' ``Proof'' and ``The Great Raid'' all performing weakly. In addition, the company was hurt by a drop in DVD sales.

``Our studio results were disappointing,'' Disney Chief Financial Officer Tom Staggs said during a conference call with analysts.

Staggs explained that six additional Miramax Films were released during the quarter than in 2004, none of which delivered substantial box office returns. The increase in output was due to the Sept. 30 departures of Miramax founders Bob and Harvey Weinstein and the desire to release much of their slate before then.

While Miramax had major critical and commercial successes in previous years, its ambitions had grown too expensive for Disney, resulting in the departure of the Weinsteins. It has been scaled-down and the company is ``looking to bringing down our investment in it dramatically,'' Staggs said.

But even without the Miramax flops, the only box office hit released by the studio during the quarter was the Jodie Foster vehicle ``Flight Plan'' which bowed late in the quarter and earned much of its nearly $85 million in domestic grosses after Sept. 30.

Revenue for studio entertainment for the quarter was down by 20 percent to $1.5 billion.

Adding to the film division's box office woes has been the industrywide slowdown in the sales of home video, which had been enjoying double-digit growth since the inception of the DVD format eight years ago.

``There is just too much product out there, a huge glut,'' said media analyst Dennis McAlpine of McAlpine and Associates. ``(Disney CEO Robert) Iger said that the big hit movies are still selling well, but what he didn't say is that they aren't selling as well as they used to.''

Iger, who officially took over the reins of the company from former CEO Michael D. Eisner on Oct. 1, did not shed any new light on the status of talks with Pixar Animation Studios over whether or not to enter into a new distribution agreement.

Pixar product has provided Disney with many of its biggest box office hits over the past decade but current No. One hit ``Chicken Little'' has provided Disney with a CG animated hit that the company created and produced itself. ``Chicken Little'' is a lock to surpass the $100 million mark this weekend.

``Creating high-quality animated films is our Number One pursuit,'' Iger said. ``All of us are extremely pleased with the success of `Chicken Little.' We recognize this early success is only a first step. Animation will remain the heart and soul of Disney.''

Disney's media networks division, which includes ABC, ESPN and ABC Family, had a strong quarter with revenues up 16 percent to $3.4 billion. ABC has enjoyed a growth in viewership for two years in a row on the strength of a growing list of top 10 hit dramas led by ``Desperate Housewives,'' ``Lost'' and ``Grey's Anatomy.''

Theme park revenue grew by 9 percent to $2.4 billion during the quarter. Attendance was up during the quarter on both coasts, with Disneyland Resort enjoying a 15 percent increase versus a year earlier and attendance at Florida's Walt Disney World up 10 percent despite the hurricanes in the region.

Consumer products revenue fell 16 percent to $519 million, which the company attributed to the sale of North American Disney Stores.

For the entire fiscal year 2005, Disney reported sales of $31.94 billion, up 4 percent from fiscal year 2004. Net income rose to $2.53 billion or $1.22 a share, up from $2.35 billion or $1.12 a share.

Disney reported its earning after the close of the market when its shares were at $25.99 on the New York Stock Exchange, up 14 cents. In after-hours trading, stock fell 64 cents to $25.35.

Greg Hernandez, [phone]

greg.hernandez(at)dailynews.com

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(color) Disney's ``Dark Water,'' starring Jennifer Connely, is one of the studio's biggest summer disappointments. Without a summer hit, Disney reported a $313 million loss in the fourth quarter.