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Iger: Downloads Not Affecting Retail

9 Nov, 2006 By: Erik Gruenwedel

The Walt Disney Co. president and CEO Bob Iger said increased distribution of content through electronic sell-through is not having a negative effect on the company's DVD sales.

Iger said Disney has sold 500,000 movie downloads on Apple's iTunes Music Store since first offering titles on the service in mid-Sept., a move that has drawn considerable protest from Wal-Mart and Target.

The two big box retailers, who reportedly account for more than 50% of all DVD sales, have complained that iTunes and other download services received superior pricing and release schedules. Both indicated they might reduce packaged media shelf space if their concerns weren't addressed.

Iger admitted the existence of issues with Target and Wal-Mart regarding pricing and release windows but said they would resolve themselves over time.

“That tension is going to dissipate over time as we learn more about how that business is impacting the consumer,” Iger said. “Have we had discussions with these retailers? Yes, absolutely. In general, our relationship with these retailers is in good shape. We are growing market share rather than moving business from one platform to another.”

He said Disney DVDs at retail remain robust revenue generators for retailers and the company has seen no indication that electronic sell-through is cannibalistic toward packaged media sales.

“This underlines the strength and uniqueness of our film library and indicates there is a consumer appetite for movie downloads that complements demand of DVDs,” said Iger.

The elimination of 650 jobs in July and phenomenal box office success of Pirates of the Caribbean: Dead Man's Chest helped The Walt Disney Co. post fourth quarter (ended Sept. 30) profit of $782 million compared to $379 million during the same period last year.

For fiscal year 2006, Disney reported record earnings of $3.7 billion on revenues of $34.2 billion compared to $2.5 billion on revenues of $31.9 billion last year.

The theatrical release of Pixar Animation's Cars, worldwide DVD sales of The Chronicles of Narnia: The Lion, the Witch and the Wardrobe, Cinderella, Aladdin and Bambi Platinum releases, and Chicken Little, among other titles, helped the studio entertainment segment increase quarterly revenues 33% to $2 billion compared to $1.5 billion last year.

Studio entertainment revenues for the fiscal year declined 1% to $7.52 billion from $7.58 billion last year. Top selling TV DVD title for the year was High School Musical.

The re-release of The Little Mermaid Limited Edition DVD has sold six million units since its Oct. 3 release with projections of 10 million units sold worldwide by the end of the year, according to Iger.

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