Success of 'Cars' helps drive Disney profits higher

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The success of the animated film Cars has driven profits at Disney to record levels, prompting it to predict a bumper Christmas of DVD and toy sales. And work is already under way to develop Cars-themed rides at Disney theme parks.

The film, produced by the Pixar studio which Disney bought last year, has become Disney's most lucrative property since The Lion King, said Bob Iger, the chief executive, and will help boost profits across all the company's divisions.

"We see enormous potential," he said. "Cars will have enduring appeal, particularly among young boys."

Disney's quarterly profit topped $1bn (£525m) for the first time in the three months to June, showing a 39 per cent rise to $1.13bn.

Largely thanks to Cars, the film studio business grew revenues by 17 per cent and swung back into the black. It was also boosted by DVD sales of The Chronicles of Narnia: The Lion, the Witch and the Wardrobe. The release of Pirates of the Caribbean: Dead Man's Chest, which has overtakenCars to be the most successful film at the US box office so far this year, came after the end of the quarter.

The creation of two successive blockbusters has put a renewed spring in the step of the Disney film business. The division has been a weak spot for the media giant in recent years, and only last month Mr Iger announced 650 job cuts. It is to concentrate on making family films under the Disney banner and cut back the number of more esoteric films made by its Touchstone Pictures business.

The success of Cars represents a coup for Mr Iger, who replaced Michael Eisner in October and had argued strongly in favour of the $8.06bn purchase of Pixar from the Apple Computer boss Steve Jobs.

Yesterday's financial results outstripped even Wall Street's most bullish expectations, and sent Disney shares up 3 per cent in early trade.

Increased attendance and higher spending by visitors pushed up revenues at the theme parks by 11 per cent. The consumer products division, which produces Disney-themed toys and games, posted a 69 per cent increase in profit.

There was also a strong performance from the television business. Disney owns the ABC network in the US, and the ESPN sports channels, where advertising income was boosted in the quarter by the World Cup.