I'm always looking for a catalyst that is going to take Disney (NYSE: DIS) to the next level. The stock hasn't been a great performer over time. Just today, the Mouse issued a press release detailing its latest merchandising plans.
Merchandising falls under the consumer products division. Now, one would expect that this segment would always be rocking considering the brand equity inherent in all of Disney's intellectual properties. Well, let's remind ourselves of how the segment did during the last earnings report. In the second quarter, operating income for consumer products dipped 24%. For the six-month period, operating income was down by 13%. Double-digit declines: nobody likes them. Management commentary about the division specifically stated that lower royalty revenue from merchandise helped to drive the performance. As can be seen, Disney needs some good ideas and strategies to return this segment to growth.
So now we come to the latest schemes from Disney. According to that linked press release, shareholders will note that Hannah Montana has been renewed for a fourth season. I'm on record as saying that the Montana franchise should probably be cast aside in favor of promoting new properties. Maybe I'm wrong. I'd love to know what the overall economics are behind the deal. Is Miley Cyrus receiving a bigger percentage of the profits? Has her salary per episode gone up? It's too bad media companies like Disney, Time Warner (NYSE: TWX), and General Electric's (NYSE: GE) NBC Universal aren't required to divulge this information. That would be very shareholder-friendly, and it would make evaluating the move a lot less complex.
I think the part of the release devoted to Toy Story is interesting. If the company plays its cards right (and by that I mean if the company keeps costs low in terms of promoting the brand) then Story should bring in a lot of merchandising monies to the Mouse's coffers. The first two films in the series are being brought back to theaters this year, and next summer will see the release of the third Story. This property has been very successful at retail in the past. I think it will be very successful again.
Plans to promote Winnie the Pooh and Mickey Mouse were also mentioned. These are classic characters that should always have big pushes behind them. Indeed, Disney needs to do more when it comes to Mickey Mouse (how about a huge role-playing video game starring the famous rodent a la Kingdom Hearts?). And, of course, Disney continues to build on its Princess and Fairies franchises.
Overall, I'm not 100% impressed. I like the Story stuff, but I'm disappointed that Montana is back. The Disney Channel needs to reduce its reliance on that name. I don't know, I just don't see anything in this press release that makes me overly excited. I do like Disney's brands, but I guess I'll have to see more than a press release to get me excited. I'll need to see unequivocally awesome execution...
Disclosure: I own Disney, GE; positions can change without notice.
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