Media and entertainment giant The Walt Disney Company reported an almost flat profit for the third quarter, and projected a large loss on the film 'The Lone Ranger', leading to a plunge in its shares in after-hours trading.
The company reported a net income of $1.85bn (£1.2bn, €1.39bn) for the quarter ended 29 June, compared to $1.83bn in the same period last year. Quarterly revenues rose 4% to $11.58bn, thanks to the better contribution from Media Networks and Parks and Resorts segments.
The Media Networks business, which includes the ESPN cable network, is the biggest revenue segment, accounting for 46% of revenue. The Parks and Resorts segment accounts for 31% of the company's revenue.
Meanwhile, the studio entertainment division which produces films posted a 2% decline in revenues to $1.59bn due to a fall in worldwide theatrical distribution results.
"Lower theatrical results reflected pre-release marketing costs for 'The Lone Ranger' and the performance of Marvel's 'Iron Man 3' in the current quarter compared to Marvel's 'The Avengers' in the prior-year quarter, partially offset by better performance of 'Monsters University' in the current quarter compared to 'Brave' in the prior-year quarter," the company said in a statement.
Lone Ranger: a Failed Bomb
During a conference call with analysts, Disney CFO Jay Rasulo said its expensive summer movie bomb 'The Lone Ranger' starring Johnny Depp is expected to lose between $160m and $190m. The loss will be recorded for the quarter ending in September.
Following the news, Disney shares dropped 1.9% in after-hours trading to $65.79 from a $67.05 close on the New York Stock Exchange.
The big-budget movie opened on 3 July, with ticket sales in the US and Canada remaining lacklustre at $29m over the first weekend. The movie had cost $250m for the company and has so far generated $175.6m at the worldwide box office.
"There has been a lot said I know about the risk of basically high-cost tent-pole films, and we certainly can attest to that given what happened with Lone Ranger," CEO Bob Iger said during the conference call.
Despite the failure of The Lone Ranger, Iger said the film studio will stick by its strategy of making big, tentpole films.
"We still believe that a tent-pole strategy is a good strategy that one way to rise above the din and the competition is with a big film, not just a big budget but big story, big cast, big marketing behind it," he said.
The company owns film production brands Disney, Pixar, Marvel and the recently-acquired Lucasfilm.