More Layoffs at Disney Interactive Ahead of November's Epic Mickey 2
The layoffs are exclusive to the online unit of Disney Interactive and did not include the company's video game group. The company has struggled for years to earn a profit with this group and has reported operating losses of more than $40 million, despite having narrowed the losses from $86 million during its second quarter.
Conversely, the media networks division has shown strong growth driven primarily by cable-television channels and the company's ESPN division, which earns the highest subscription fees of any cable channel available.
The May release of The Avengers also far exceeded revenue expectations. The movie has gained more press as of late since the announcement that Amazon (NASDAQ: AMZN) would be offering the film, among others, to subscribers in an effort to gain more share from Netflix (NASDAQ: NFLX) users.
This is the second round of layoffs Disney Interactive has experienced in less than two years, as the company announced 200 layoffs in January 2011 in "reorganization" efforts. Employees will hope to return based on the anticipated success of the company's November 18 release of " Disney Epic Mickey 2: The Power of Two", which may help the Interactive section regain some traction in the revenue marketplace.
It appears the success of Disney's Interactive division not only depends on its upcoming releases, but also on its partnerships with sites like YouTube and Activision Blizzard (NASDAQ: ATVI) to provide relevant online experiences and new video games, respectively.
Disney's other divisions seem healthy, as ESPN has extended the Major League Baseball contract through 2021. The company reported positive earnings in early August for its second quarter, showing an 18 percent increase in operating income thanks to The Avengers, a welcome addition to an already solid balance sheet.
Second quarter earnings per share (EPS) reports of $1.01 beat consensus estimates of $0.93 and total revenues came in slightly lower-than-expected ($11.088 billion versus $11.305 billion estimate) but overall, Disney is a strong company that can only stand to gain from continued positive releases.
Success from the November releases in the company's Interactive division and established partnerships can only prove accretive for shares.
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