Whoa, what a terrible quarter for Disney (NYSE: DIS)! Forget the magic. There's no magic going on at Disney. For the fiscal first quarter, revenues decreased 8%, earnings per share decreased 29%, operational cash flow decreased 60%, and free cash flow was negative. Decrease, decrease, decrease! Looks like Disney's brands cannot fend off a recession, no question. Sorry, Jonas Brothers and Hannah Montana.

Disney, which competes with Time Warner (NYSE: TWX), CBS (NYSE: CBS), Viacom (NYSE: VIA), News Corp. (NYSE: NWS) and General Electric's (NYSE: GE) NBC Universal, earned, after taking out a $0.04 per-share benefit from an investment sale, $0.41 per share. According to my earnings preview, the call was for around $0.52 per share. Well, I thought the Mouse was going to miss, but I think I characterized the potential miss as maybe being on the "slight" side. Yeah, this wasn't a slight miss.

The Disney (NYSE: DIS) Channel original movie High School Musical turned out to be nothing less than a gold mine. The musical phenomenon -- a perfect balance of innocence and coolness -- has been seen by roughly 160 million people, according to Disney. It has generated $500 million in sales of DVDs, soundtracks (it was the top-selling album last year) and other retail items. A subsequent concert tour, stage version, and ice show are also bringing in the dough, and the movie has inspired real-life high school musical productions numbering in the thousands.

Will the sequel live up its growing giant of a predecessor?

The sequel is "a scootch more mature," Disney Channel Worldwide entertainment chief Gary Marsh says. But that's not likely to affect viewership, since the film fundamentally seems to fit in with the big cultural picture: "It keys into the popularity of music and dance that's sweeping the country with shows like So You Think You Can Dance, Dancing With the Stars and American Idol," says Neil Meron, producer of the new movie musical Hairspray.

According to USA Today, word on the street is that many analysts are expecting HSM2 to match or exceed the premiere ratings of the original. The song "What Time Is It?" from the sequel was released in May and holds a top 50 spot on iTunes' Top 100 Songs list, and a music video for the song was released in June. It is also the first Disney Channel original movie to run commercials on ABC (a Disney property).

High School Musical 2 debuted on Disney on Demand via Cablevision (NYSE: CVC)'s digital iO service and Verizon (NYSE: VZ)'s FiOS TV last Friday, a week earlier than The Disney Channel premiere August 17th. Interesting move Disney.