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News Corp. COO: ‘DVD Business Continues to Have Legs’

8 Feb, 2012 By: Erik Gruenwedel

Home entertainment helps drive Fox studio Q2 income up 108%

With the media and Wall Street’s focus on digital distribution of entertainment, 20th Century Fox Home Entertainment is maintaining significant attention on packaged media, including Blu-ray Disc, News Corp. president and COO Chase Carey said.

In a Feb. 8 fiscal call with analysts, Carey said despite the buzz surrounding digital distribution, physical media continues to generate the bulk of home entertainment revenue — a reality the COO doesn’t see changing much in the near future.

“Blu-ray and electronic and digital distribution are our future,” Carey said. “DVDs have been around for a long time … but I don’t want to imply that DVDS don’t have real legs. Blu-ray has been pretty growth growth derivative. We are going to make sure we manage that business intelligently. And I think the DVD business continues to have legs.”

The COO reiterated support for the burgeoning SVOD market spearheaded by Netflix and Amazon Prime, among others. He said Fox’s content license contracts are structured to provide recurring revenue streams while at the same time enables the studio to add new players.

“I think this is an arena that has enormous growth,” he said. “I don’t think anybody is saying video isn’t a core part of the future.”

Separately, Carey remained critical of industry efforts at rolling out authenticated on demand distribution channels (“TV Everywhere”), saying the process has taken too long and lacks a compelling feature for consumers.

“In this world you can’t spend three or four years getting something going,” Carey said.

He said the concept of delivering proprietary video content on demand is a good one and serves the industry’s purpose of bringing content to consumers 24/7. Carey, however, believes content holders should also receive fair value for ubiquitous access.

“Apple’s proved it. Apple doesn’t win by being cheap. Apple wins by creating a great experience,” Carey said. “All of us just have to do a better job of moving these things forward.”

20th Century Fox Studios reported second-quarter (ended Dec. 31) operating income of $393 million, up 108% from operating income of $189 million during the previous-year period.

The studio, which includes 20th Century Fox Home Entertainment, said results were driven in part by global home entertainment sales of Rio, Rise of the Planet of the Apes, X-Men: First Class and Mr. Popper’s Penguins, as well as worldwide theatrical releases Alvin and the Chipmunks: Chipwrecked (which has generated more than $300 million in worldwide box office receipts to date) and The Descendants (winner of Golden Globe for Best Picture – Drama and Best Actor – Drama and nominated for five Academy Awards including Best Picture and Actor in a Leading Role).

Prior-year second quarter results included theatrical releases Unstoppable, Chronicles of Narnia: Voyage of the Dawn Treader and Gulliver’s Travels. This year’s results also benefited from increased operating profit at the television production studios, led by the growth of digital distribution revenue from the licensing of content to Netflix and Amazon Prime.

Indeed, Fox has generated about $200 million in fiscal year-to-date revenue just from streaming agreements with Netflix.

Studio revenue topped $2.1 billion, up 10.5% from revenue of $1.9 billion last year.

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