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By : Erik Gruenwedel | Posted: 09 Feb 2010
egruenwedel@questex.com

Oft-maligned packaged media marked a reversal of fortune at The Walt Disney Co. The company’s studio segment Feb. 9 reported first-quarter (ended Jan. 2) operating income of $243 million, up 30% from operating income of $187 million during the previous year’s same period.

Disney’s studio results include Walt Disney Studios Home Entertainment.

The studio cited strong DVD/Blu-ray Disc sales of Disney/Pixar’s animated hit Up and romantic comedy The Proposal, starring Oscar-nominated Sandra Bullock, for keeping revenue relatively unchanged at $1.9 billion.

In addition, Disney said home entertainment results were driven by lower distribution costs and marketing expenses, spurred by cost reduction initiatives, and lower production cost amortization and participation expense.

Spearheading some of those changes was Bob Chapek, president of Walt Disney Studios Home Entertainment, who last November was promoted to president of overall distribution, including digital, for Walt Disney Studios.

In a call with investors, CEO Bob Iger said he preferred not to compare quarterly results for DVD sales due to the varying nature of the release slate. He said ongoing recession concerns, increased competition from alternative entertainment sources and the actual time spent on entertainment continued to challenge home entertainment.

Iger said he was pleased by the “decent” premium pricing afforded by Blu-ray Disc releases, in addition to the new three-disc combos featuring Blu-ray, standard DVD and digital copy.

He said 68% of the revenue from last year’s six-week sellthrough window re-release of Snow White and the Seven Dwarfs was attributed to Blu-ray, which Iger characterized as “a huge number,” and he said made the title the No. 1 Blu-ray release in 2009.

“So, clearly there’s been some continued growth of Blu-ray in the marketplace,” Iger said. “It’s definitely a product that consumers seem to like. We are getting the pricing premium we had hoped to get and have not seen signs of that falling even in the difficult economy. We remain believers.”

Iger said the success of Snow White underscored the need to reconfigure release windows, including a separate sellthrough window.

He said the studio would continue to tread cautiously within home entertainment, which he said included approaching theatrical operators about the importance of packaged-media sales.

“We feel that it is really important for us to maintain a very healthy business on the home video side, which we think is actually in the best interest of theater owners,” Iger said. “Mindful of what is going on the home video side, we feel that it is time on a case-by-case basis to really take a look at how we are windowing home video product into the marketplace.”

He said the primary focus at the studio continues to be improving the quality of the theatrical slate, spearheaded last year by the appointment of Richard Ross as president of Disney Studios, and merging internal operations, including home entertainment.

Iger said he didn’t expect to see complete results from the internal restructuring until 2011. The CEO said Ross would figure promptly in Disney’s upcoming live-action slate, which includes Alice in Wonderland, Prince of Persia, The Sorcerer’s Apprentice and Iron Man 2 — the latter is the first Marvel film released following its acquisition by Disney.

He also said Apple’s pending iPad tablet offered significant potential to content distributors.

“We think it could be a game changer in terms of enabling us to create essentially new forms of content,” Iger said. “The interactivity that it will allow on such a portable device is going to enable us to really start developing product that is different than the product you typically see on an Internet-connected computer or a TV.”

Indeed, Disney’s digital revenue topped $2 billion in 2009, according to Iger — a sizable percentage related to content sales on iTunes.

Finally, Iger said internal discussion concluded that investing further in new Miramax movies was not a core strategy for Disney going forward. He said any further monies spent at the unit would be for titles in production or pending release.
 

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