Bob Iger: Digital No Home Entertainment Panacea … Yet

5 Feb, 2014 By: Erik Gruenwedel

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Reduced costs up studio’s first-quarter home entertainment profit

Walt Disney CEO Bob Iger said home entertainment’s scant 1% uptick in consumer spending in 2013, driven by increases in digital distribution, is a positive trend that shouldn’t be heralded as a game saver just yet.

Speaking in the company’s Feb. 5 fiscal call, Iger said the studio’s emphasis on featuring action and family fare through proprietary brands — Disney Animation, Marvel, Pixar and LucasFilm — lends itself toward long-term distribution opportunities in secondary markets, including home entertainment.

“We’ve been bullish about digital … because we have a brand advantage there by creating destinations on digital platforms,” Iger said.

That said, the CEO cautioned that packaged media’s 13% sales decline in 2013 wasn’t completely offset by electronic sellthrough’s 50% surge due to the latter’s significantly smaller sales base.

“I think it’s still early in terms of just how significant that all could be,” Iger said. “The bottom line is that we are making movies that we believe stand a better chance of doing well in the [retail] markets than the non-branded, non-franchise movies, particularly movies that are directed at families.”

Indeed, Iger said LucasFilm's highly-anticipated Star Wars: Episode VII theatrical release on Dec. 18, 2015, is shaping up to be the studio's biggest release ever. The film begins shooting in May.

Meanwhile, reduced per unit cost of sales and lower marketing costs helped Walt Disney Studios Home Entertainment drive up Walt Disney Studios’ first-quarter (ended Dec. 28, 2013) operating income 75% to $409 million.

Revenue increased 23% to $1.9 billion on the strength of theatrical releases Frozen and Marvel's Thor: The Dark World, compared with Wreck-It Ralph and no Marvel movies in the prior-year quarter.

Disney doesn’t disclose operating results of individual studio properties.

Disney said the increase in domestic home entertainment contribution was partially offset by lower unit sales. The decrease in marketing costs was due to fewer significant releases in the current quarter.

The operating income increase in TV/SVOD distribution was due to higher international sales in the current quarter, partially offset by a decrease in SVOD revenues due to a domestic sale of library titles in the prior-year quarter.

Disney and Netflix’s landmark pay-TV distribution deal doesn’t take effect until 2016.

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