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Disney to Expand Movie Beam as DVD Sales Push Q2 Net

12 May, 2004 By: Erik Gruenwedel

Ongoing global home video sales of The Lion King 1-1/2, Finding Nemo, Pirates of the Caribbean, and Brother Bear, coupled with strong amusement parks revenue helped The Walt Disney Co. post a 71 percent increase in second-quarter earnings for the period ended March 31.

Net income was $537 million, or 26 cents a share, on revenue of $7.2 billion, compared with $314 million, or 15 cents a share, on revenue of $6.5 billion for the same period last year.

In a conference call with analysts, Disney executives said global DVD sales reached 94 million units during the quarter, an 18 percent increase from a year ago.

“DVD continues to represent a strong growth category,” said Tom Staggs, Disney CFO.

CEO Michael Eisner said the relative low cost of DVD players and potential for next-generation DVD formats represent “dramatic” supporting roles that digital technology can play in driving performance at Disney.

“When high-def DVD enters [the market], the retail bonanza could well repeat itself,” Eisner said.

He said Disney remains encouraged by the “technological opportunity” represented by Movie Beam, a TiVo-like video-on-demand subscription service launched last year in Salt Lake City, Spokane, Wash., and Jacksonville, Fla.

Movie Beam allows consumers to download up to 100 films (at $4 per new release; $2.50 per catalog release) into a set-top box via over-the-air TV broadcast spectrums. Each film can be viewed repeatedly over a 24-hour period.

The service is being expanded to three unnamed cities in the fall.

“The consumer response has been encouraging,” Eisner said. “Movie Beam and its associated innovations represent yet another way to develop new revenue streams.”

In a related matter, Eisner downplayed media reports of a rift with film unit Miramax Films and chief executives Bob and Harry Weinstein regarding Disney's refusal to distribute Michael Moore's new film Fahrenheit 9/11.

The film reportedly portrays President George W. Bush and his family in a negative light on a host of issues.

“We have offered Miramax the ability for them to distribute Fahrenheit 9/11 [or] go to a third party,” Eisner said. “The assertions [to the contrary] in the press are not true.

“We believe Miramax to be a very viable product to our company,” Eisner said. “They have been successful financially two the last five years. The issue on table seems to be Fahrenheit 9/11.

Miramax announced Wednesday that it would buy Fahrenheit 9/11 back from Disney for $6 million.

It has not announced a release date or distributor.

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