July 30 (Bloomberg) -- Walt Disney Co., the second-largest U.S. media company, said third-quarter profit rose 9 percent as its theme parks withstood the slowing U.S. economy and the ESPN sports network collected more subscriber fees.

Net income increased to $1.28 billion, or 66 cents a share, from $1.18 billion, or 57 cents, a year earlier, Burbank, California-based Disney said today in a statement. Sales rose 2.1 percent to $9.24 billion in the quarter ended June 28.

European tourists bolstered business at Disney's U.S. parks, Janna Sampson, co-chief investment officer at Oakbrook Investments LLC in Lisle, Illinois, said in an interview. The higher fees at ESPN countered falling advertising sales at the company's TV stations and a drop in revenue from movies.

``People have been predicting the demise of the theme parks for quite some time,'' Peter Sorrentino, senior portfolio manager at Huntington Asset Advisors in Cincinnati, said in an interview. ``It is not appreciated as it should be.'' His firm held 430,000 Disney shares as of a June regulatory filing.

Disney fell 77 cents, or 2.4 percent, to $30.90 in extended trading after the company said advertising sales have slowed in recent weeks at ABC and ESPN. The shares rose 75 cents to $31.67 at 4:02 p.m. in New York Stock Exchange composite trading and have declined 1.9 percent this year.

On a conference call, Chief Financial Officer Tom Staggs cited weaker spending by automakers, consumer electronics and financial-services companies.

Largest Business

``Near term, we could see some advertising softness at its media networks, its largest business,'' Robin Diedrich, an analyst at Edward Jones & Co. in St. Louis, said in an interview. She recommends investors buy the shares and doesn't own any herself.

Profit minus some items totaled 62 cents, beating the 60- cent average of 18 analysts' estimates compiled by Bloomberg. The latest quarter included 4 cents in gains from the acquisition of Disney Stores in North America, the sale of movies.com and a favorable tax settlement. Sales beat the $9.16 billion average of 16 analysts' estimates.

Third-quarter operating profit at the parks and resorts rose 3.2 percent to $641 million even with the loss of Easter holiday attendance, which came in the fiscal second quarter this year. Sales gained 4.6 percent to $3.04 billion.

``Our park performance during the quarter is noteworthy considering the economic environment,'' Chief Executive Officer Robert Iger said on a conference call.

Park Profit

Park profit was driven by gains at Walt Disney World and Disneyland Paris, while income fell at the Disneyland Resort in Anaheim, California, the company said. Sales grew because of favorable currency translation and higher guest spending and attendance in Paris, the company said.

Room reservations for the three months ending in September are ``virtually on par'' with a year earlier, Staggs said on the call. Reservations in the quarter ending in December are ``modestly ahead'' of a year earlier, he said, adding the company hasn't offered discounts.

Disney's broadcast division, which includes ABC, reported operating profit fell 11 percent to $260 million on lower ad sales at TV stations and declining ratings after a 100-day writers strike shut down production of new shows. Sales were little changed at $1.53 billion.

``The impact on Disney of a slowdown in advertising has less impact than it would at Viacom,'' Sampson said. ``Theme parks are a big part of Disney and have very little advertising exposure.''

Advertising Sales

About 20 percent of Disney's 2007 revenue came from advertising, compared with 33 percent for Viacom Inc., which fell in New York trading after reporting that second-quarter U.S. ad sales missed its forecast.

ESPN, the most-watched sports TV network, collected fees earlier in the year from pay-TV operators, resulting in a 14 percent rise in profit to $1.21 billion for the cable division. Sales at the unit, which includes the Disney Channel, gained 12 percent to $2.59 billion.

Profit at Disney's film studio fell 49 percent to $97 million on a 19 percent decline in sales to $1.43 billion.

``The Chronicles of Narnia: Prince Caspian,'' Disney's biggest film release in the period, garnered $140.1 million in U.S. ticket sales, according to Box Office Mojo LLC. A year earlier, ``Pirates of the Caribbean: At World's End'' collected much of its $309.4 million in domestic ticket sales, the Burbank, California-based box-office researcher said.

Disney said profit from consumer products fell 4.2 percent to $113 million as the company reabsorbs its Disney Stores operation from Children's Place Retail Stores Inc. Sales rose 20 percent to $642 million on the added retail store revenue.

Disney's profit a year earlier was reduced by 1 cent on a loss from the discontinued ABC Radio operation. The company's shares outstanding declined 6.3 percent from a year earlier.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

Last Updated: July 30, 2008 19:15 EDT