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Disney CFO: Industry Needs a New View on Declining Disc Sales

28 Feb, 2012 By: Erik Gruenwedel

Jay Rasulo said Disney, Pixar, Marvel movie franchises strongest antidote to ‘melting’ home entertainment ice cube

Faced with softening retail sales of movies at retail, Walt Disney Studios is emphasizing investment in proprietary franchise titles that generate  stronger sellthrough (than rental) with consumers, said CFO Jay Rasulo.

Speaking Feb. 28 at Morgan Stanley Technology, Media and Telecom conference in San Francisco, Rasulo said Disney has determined it can generate higher margins through investing exclusively in Disney animation, Pixar animation, Marvel live-action and, to a lesser extent, Disney live-action movies. In addition, Rasulo said the theatrical release slate would continue to be trimmed, and budgets for remaining titles expanded.

Rasulo said movies greenlighted under Disney Studio chief Rich Ross begin to hit theaters in 2013.

“The melting ice cube of the DVD business should cause everybody in the motion picture business to look at the business through a different lense,” he said. “We’re looking for bigger, four-quadrant [movie] hits that really are inputs to what we see is our unique infrastructure and unique ecosystem.”

Rasulo said that if a movie is worthy of a franchise, the number of distribution outlets Disney controls to monetize it takes the company out of the pure economics of the film business and brings it to the economics of a lot of other businesses that have “extremely” high margins. In addition to focusing on tent pole releases, Disney is distributing four to six live-action titles for DreamWorks SKG.

“That helps us [justify] our distribution infrastructure,” he said.

When asked about cloud-based digital storage of movies, Rasulo said its success remains dependent on the participation of key “recognizable” brands among consumers that convey ease of use and interoperability. That would appear to suggest Disney is waiting for Apple to expand the current iCloud platform to include movies. Launched last fall, iCloud has 100 million users and currently only stores music, photos and documents.

“I think brand will play a huge role in [the rollout of digital storage],” Rasulo said. “I think it’s just a matter of time.”

The CFO admitted the studio has been talking about it s proprietary cloud-based platform – Disney All Access – for some time. He said successful rollout of a digital locker would occur eventually – likely following the product evolution of DVD, which was preceded by Betamax. He said interoperability of digital storage among content from all studios and sources is key.

“It’s unclear [regarding widespread rollout], I think we’re pushing a little bit down the road,” Rasulo said. “Somebody’s going to introduce a product that really works [resulting] in an avalanche of others and the consumer will get an ordinate amount of confidence [in cloud-based move storage].”


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