Transformers lifts hope for Paramount's Q4
PHYSICAL: Q3 home entertainment sales fell 21%, but theatrical puts studio into profit
By Danny King -- Video Business, 11/3/2009
NOV. 3 | PHYSICAL: Paramount Pictures’ third-quarter home entertainment sales dropped 21% from a year earlier because of difficult comparisons to popular 2008 releases. The studio forecast increased DVD sales on fourth-quarter releases such as Transformers: Revenge of the Fallen, which became the best-selling title of the year in its first week, when it sold 7.5 million units.
Still, Paramount reported a third-quarter profit and helped boost Viacom’s earnings as theatrical releases such as Transformers 2 and G.I. Joe: The Rise of Cobra as well as lower costs more than offset the home entertainment decline, the company said in a statement.
Paramount’s home entertainment revenue fell to $469 million from $593 million a year earlier, as sales from current titles such as the DreamWorks Animation animated film Monsters vs. Aliens failed to keep pace with year-earlier releases including Iron Man, parent company Viacom said on a conference call with analysts today.
With Paramount not releasing Transformers 2 and G.I. Joe DVDs until the fourth quarter, Oct. 20 and Nov. 3, respectively, the studio’s home entertainment results lag an industry in which U.S. third-quarter consumer spending on all home entertainment formats—DVD, Blu-ray Disc, digital distribution and cable/satellite video-on-demand combined—outperformed most other consumer goods categories, dipping just 3.2%, to $4 billion, according to DEG: The Digital Entertainment Group. U.S. DVD rental revenue in the third quarter increased 10% from a year earlier as consumers affected by the recession hunkered down with inexpensive entertainment, according to Rentrak Corp.’s Home Video Essentials.
“Identifying greater efficiencies in the home entertainment sector is a priority,” Viacom CEO Philippe Dauman said on a conference call today, adding that cost savings from staff cuts and a recent agreement with Technicolor will help the studio save “tens of millions of dollars” annually.
Paramount’s third-quarter operating income was $69 million, compared with a $19 million operating loss a year earlier, as Transformers 2 and G.I. Joe helped boost worldwide theatrical revenue by 16%. The studio’s performance helped Viacom boost its overall net income by 15% to $463 million, or 76¢ a share, from $401 million, or 65¢, a year earlier. Viacom’s sales fell 2.7% to $3.32 billion as the DVD sales declines offset the positive effect of The Beatles: Rock Band videogame release from Viacom’s Harmonix unit in September.
Additionally, Transformers, which had more than $800 million in worldwide box-office sales after its June 26 theatrical release, will ensure a fourth-quarter increase in home entertainment sales, Viacom chief financial officer Tom Dooley said on the call. Since its Oct. 20 home entertainment release, Transformers has sold 8.3 million DVD units, and its 1.4 million units of Blu-ray units sold make it the most popular Blu-ray title of the year, Dauman said.
Dauman added that Viacom debuted its Epix streaming movie site late last week and is “close to additional distribution announcements.” Paramount, Lionsgate and MGM joined a year ago to start Epix, envisioned as a premium cable movie channel and subscription online movie service competing against Time Warner’s HBO, CBS’s Showtime and Liberty Media’s Starz.
