Disney's film revenue falls in quarter

CEO Iger says Blu-ray studio unlikely to release in HD DVD

By Jennifer Netherby -- Video Business, 5/8/2007

MAY 8 | Stronger theatrical releases domestically helped Disney grow operating income 60% in its filmed entertainment division during the second quarter, the company reported Tuesday. However, revenue for the segment, which includes home entertainment, was off 13% to $1.6 billion because of a lighter international release slate than in the prior year.

Overall, Disney saw net income jump 27% to $931 million for the quarter ended March 31. Revenue was up 1% to $8.07 billion.

The studio’s earnings growth benefited from cost cutting at the studio and the surprise performance of Wild Hogs during the quarter.

Disney CEO Robert Iger said he was pleased with the results and talked up upcoming theatrical releases Pirates of the Caribbean: At World's End and Pixar’s Ratatouille, along with next week’s Blu-ray Disc release of Pirates of the Caribbean: Dead Man’s Chest.

“As more blockbusters are released and the price of hardware decreases, we expect the format to grow nicely,” Iger said during an afternoon call discussing results. He also said the studio was unlikely to put movies out on rival format HD DVD.

For the upcoming quarter, the company said it would be hard to beat its prior year results as there isn’t a comparable release to The Chronicles of Narnia: The Lion, the Witch and the Wardrobe, which was one the studio’s best-selling DVDs of 2006.

Asked about trials with Comcast and Time Warner releasing movies day-and-date on DVD and video-on-demand, Disney execs hinted that those tests were going well.

“During the time we’ve been testing, our sell-through business at Disney has been extremely, extremely strong,” Iger said.

Iger said the studio isn’t in discussions with Comcast or any other companies to make movies available on cable during their theatrical release. Comcast chief operating officer Steve Burke said at the NCTA cable conference in Las Vegas that the company was in discussions with studios to make movies available on VOD for $30 to $50 during a film’s theatrical release.

Iger said the biggest new movies and TV shows are the biggest sellers on iTunes, not library titles. “We’re finding that the fresh titles are selling the most,” he said.

Asked about iTunes’ wholesale pricing, Iger said the studio makes the same margins on movies sold through iTunes as it does for those sold on DVD. Disney is the only studio with a new release movie download deal with iTunes. Apple has been unable to sign new release movie download deals with other studios because it has reportedly refused to pay DVD wholesale prices for those downloads.

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