Consumers race to pick up Cars
5 million copies sold in two days, as Disney doubled operating income in fiscal Q4
By Jennifer Netherby -- Video Business, 11/9/2006
NOV. 9 | Consumers sped out to buy 5 million DVDs of Disney/Pixar’s Cars in its first two days in stores, putting the title on track to be one of the top-sellers of the year and jump-starting what is expected to be a huge fourth quarter for the studio.
Walt Disney Co. CEO Bob Iger announced the sales of Cars during a Thursday afternoon conference call to discuss the company’s fourth-quarter and full-year earnings.
Cars also debuted on iTunes Tuesday, though the studio didn’t disclose how many copies were downloaded.
Disney has sold more than 500,000 movie downloads through iTunes since its launch in September and more than 12 million TV show downloads since October 2005, Iger said. He added that the studio believes download sales complement DVD sales.
“We haven’t seen any impact that is negative or cannibalistic from the download business,” Iger said.
He said the company has sold 6 million DVDs of The Little Mermaid, which also debuted day and date on iTunes, and the disc is on track to sell 10 million units worldwide.
Disney is the only studio that has a deal with iTunes to sell movie downloads, where low pricing has brought complaints from DVD retailers Wal-Mart and Target. When asked by an analyst about the complaints, Iger said the studio’s relationship with mass retailers is in “great shape” and that Disney is in talks to offer its films through planned download services from retailers.
“In general, our relationship with mass retail is actually very strong,” Iger said. “Clearly, the digital download initiatives, particularly movies, have created some tension over issues like pricing and windowing, but we ultimately believe that tension is going to dissipate over time as we learn more about how the business is impacting the consumer.”
Disney chief financial officer Tom Staggs said the company expects download and online advertising revenue from TV show streams could reach $700 million in the next fiscal year.
A strong slate of movie and DVD titles helped The Walt Disney Co. more than double operating income in its studio entertainment segment during the fiscal fourth-quarter ended Sept. 30 and for the full year, the company reported Thursday.
Operational improvements and cost cutting in home entertainment and worldwide theatrical distribution pushed operating income into positive territory, with the company reporting $214 million for the quarter compared to a loss of $313 million the previous year. Revenue was up 33% to $2 billion.
The company slashed its studio workforce by 20% in July and said it would slim the number of movies it releases.
The studio said the improvements in its home entertainment business came from cuts in marketing and trade programs for DVDs and lower distribution costs due to fewer returns. The studio also reported improved margins on sales of TV on DVD box sets, though that was partially offset by fewer unit sales compared to the previous year.
Theatrical improvements came from lower distribution costs due to fewer Miramax releases and the international theatrical performance of Pirates of the Caribbean: Dead Man’s Chest.
For the full year, studio entertainment revenue slid 1% to $7.5 billion. However, operating income more than tripled to $729 million due to improvements in worldwide motion picture and DVD distribution.
Improvements in the studio entertainment business and strong performance in media networks and theme park divisions boosted companywide net income 89% to $782 million for the fourth quarter. Revenue grew 14% to $8.8 billion.
For the full year, net income was up 33% to $3.4 billion companywide. Revenue was up 7% to $34.2 billion.
