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Disney's Studio Entertainment Revenues Up 2% for the Year Amid Slide; DVD Growth Boosts Home Video Revenues

8 Nov, 2001 By: Joan Villa

DVD growth boosted home video revenues and provided one of the few bright spots in fourth quarter and year-end earnings from the Walt Disney Co.

Much of Disney's theme parks, television media, consumer products and parks and resorts divisions were feeling the pinch from a slow economy pushed further into recession by the Sept. 11 attacks, resulting in lackluster or declining revenues that could continue sliding downward into 2002.

The company warns that operating income from the first quarter may be less than half of the strong results posted the prior year. Even an improved business climate later in 2002 would still bring down operating income 10% to 15% over the current year, the company adds.

Despite the challenging times, president and c.o.o. Robert Iger says Disney's recently released Snow White DVD is on track to selling 3 million units, making it the studio's top DVD performer to date. He cited Toy Story 2, Lady & the Tramp II, Spy Kids, Scary Movie, Gone in 60 Seconds and Remember the Titans as particularly strong video performers.

“Home video continues to shine with six of the top 10 titles, including four out of the top five best-selling titles in calendar 2001,” Iger says.

He sees continued growth for DVD, citing Dumbo sales that are running 35% to 40% DVD, about 20% higher than the company expected because of its appeal to young children whose parents typically haven't been the quickest to adopt DVD. “And that's not as a result of the VHS not selling, it's unbelievably strong DVD sales,” he adds.

Next year, Disney plans a slate of sequels — some theatrical and some direct-to-video — to Spy Kids, The Princess Diaries, Peter Pan, Cinderella, The Hunchback of Notre Dame, 101 Dalmations, Tarzan, The Jungle Book and is in talks with Pixar for a second Monsters, Inc. The studio also plans a widescreen Imax release of Beauty and the Beast in January, which will return in the fall as Disney's second DVD in its 10-title Platinum Collection, following this year's Snow White release.

Iger also expects growth from video on demand, which he says is capable of producing margins 20% better than home video.

Overall, Disney's studio entertainment revenues were up 2% for the year ended Sept. 30 to $6.1 billion and operating income more than tripled to $260 million.

Strong results for domestic home video, led by a doubling of DVD revenues from the previous year, made up for declines in both domestic theatrical revenues and worldwide home video, the company reported.

“Revenues from VHS were relatively flat from the previous year, demonstrating that DVD is doing far more than simply replacing existing technology,” elaborates Tom Staggs, senior executive v.p. and c.f.o.

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