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Disney's troubles more about Titles & economy than Blu-ray or DVD


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  • Disney's troubles more about Titles & economy than Blu-ray or DVD

    Disney’s Troubles More About Titles and the Economy Than Blu-ray or DVD

    By Stephanie Prange
    Posted: February 11, 2009

    Disney CEO Bob Iger, in last week’s financial call, seemed to be dumping on discs — at least that’s the way many analysts sized it up. Wall Street analysts, always looking to promote digital delivery, took Iger’s comments as a chance to once again declare Blu-ray a dud and the age of packaged media on the wane. Los Angeles Times columnist Patrick Goldstein parroted the refrain, “The DVD market, which has quietly supplied the biggest pure profits for Hollywood in recent years, is in the doldrums, evidencing little hope of regaining its high-roller status, with Blu-ray looking more and more like a dud while many young consumers experiment with alternative ways of watching movies.”

    But their comments have to be taken with a grain of salt. Wall Street doesn’t make money on stocks and businesses that are mature (such as packaged media). Investors make money on new businesses that are in the early stage of their lifecycle, with lots of upward stock price potential — like digital delivery. That’s why they are always so eager to dance on the grave of packaged media.

    CNBC’s Lee Brodie this week titled his commentary “What’s Working: Digital Delivery.” He goes on to offer Neflix as an example, which reported one-fifth of its customers were watching streaming. “The trend sent profit up a surprising 45%,” declares a breathless Brodie. While streaming is indeed a plus for Netflix subscribers, Brodie neglects to mention that Neflix also is making MORE MONEY on Blu-ray subscribers by charging them $1 more. He also neglects to mention that there are 700,000 Netflix Blu-ray subs who are paying more for the privilege. Netflix doesn’t charge ANY premium for streaming. Might one also be able to say that Blu-ray is goosing earnings?

    So let’s examine what Iger said.

    “We do believe that the cost of both producing, distributing and marketing the DVDs needs to be addressed,” Iger said. He added, with large DVD collections, “people potentially will be more selective about what they buy.”

    He also called this “the weakest economy in our lifetime.”

    Might that be the real reason people aren’t buying as much, rather than any inherent lack of disc appeal? If discs weren’t in demand, Netflix wouldn’t be making a profit because four-fifths of its customers would be gone.

    Other CEOs were more kind.

    Time Warner CEO Jeff Bewkes: “It is true home video sales were down in the quarter for us and the industry, but the A-titles and catalog have done well. The B-titles have not done well, so that will be a bit of a challenge for everyone in the industry this year.”

    He’s got it partially right, though I think catalog is suffering on DVD. When he’s talking about catalog, he is probably looking at sales on Blu-ray and TV DVD.

    Fox’s Peter Chernin noted, “I think it is too early to see it (the disc sales falloff) as a secular decline. … We think it is important to keep an eye on the business. [But] we are not changing our wheels.”

    Disney’s business is falling off because it, like the others, has been hit by a horrible economy. Meanwhile, it also had fewer great titles compared to the year before. Wall-E, Sleeping Beauty, Tinker Bell and The Chronicles of Narnia: Prince Caspian aren’t of the same caliber on disc as Pirates of the Caribbean: At World’s End, High School Musical 2, The Jungle Book and Ratatouille. Prince Caspian was disappointing to put it lightly (in fact, Disney won’t make the next in the series). Wall-E, though critically acclaimed, doesn’t appeal to kids as much as Ratatouille does, as evidenced by watching my own kids, 10 and 6. And, though it’s great, Sleeping Beauty is no Jungle Book.

    The studios have been on the high of enormous DVD sales, and they’ll have to lower their projections a bit because of an unprecedented poor economy, but I don’t think it’s a disaster by any means — nor is it really a reflection on the inherent value of packaged media. Studio and talent salaries will have to get a haircut, and there may not be as many extras on disc, but the disc will be around for some time to come.
    Disney?s Troubles More About Titles and the Economy Than Blu-ray or DVD |
    "If you don't know how to draw, you don't belong in this building" - John Lasseter 2006

  • #2
    Re: Disney's troubles more about Titles & economy than Blu-ray or DVD

    Iger should start looking at packaging extras with Disney dvd's again. Too many of the most recent releases have lacked making of features, interviews with cast, musical artists. Even one of the PotC dvd's had 3 different commentaries, now we're lucky if there is even one. No, I don't want one of disney's tween stars trying to sing a song from the movie- give us the background on the original singer and a live performance, instead. And give up more deleted scenes and songs, more alternate story considerations. I really think the Bolt dvd is going to ignore a lot of Chris Sanders work, hope I'm wrong about that.
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    • #3
      Re: Disney's troubles more about Titles & economy than Blu-ray or DVD

      Iger's comments really come as no surprise. He's been a champion for digital downloads for a while and made Disney the first mainstream entertainment company to offer existing programming via the web. He's also suggested movie studios shorten the turnaround time between theater showings and DVD/digital download releases.

      Even Steven Jobs has said the future in entertainment is via download and streaming. He's never been a fan of Blu-ray.

      Wall-E is way more appealing and accessible to children than Ratatouille. I base that on observing my two-year old granddaughter who adores Wall-E. So there.

      Hard to make a fair comparison between two of Disney's weakest "classics."
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      • #4
        Re: Disney's troubles more about Titles & economy than Blu-ray or DVD

        The studios have had tremendous growth with DVD, and have mare a boat load of money, and yes the market is maturing but I wouldn't ring the death knell for DVD just just yet.

        One of the problems, has been the double and triple dipping of titles and the multiple releases, now you throw HD-DVD and Blue Ray, and you scare people off. Then to make matters worse for Blue ray, you drop the retail price of catalog DVD's from $20 street to $5 street while still asking $30 for 'B' titles for Blu Ray that most people don't care about anyway... and you wonder why the numbers are down?


        • #5
          Re: Disney's troubles more about Titles & economy than Blu-ray or DVD

          Here is the truth:

          When Iger signed on at CEO. His very first action was to strangle Film Production.

          I think his hope was that TV production would begin to move in and pick up the slack... Look at the major releases from the studio - they have been TV properties. Hanna Montana, High School Musical, etc...

          The net result is there are fewer film based DVD releases every year. The quality of those releases really has not changed that much. In fact they have gotten worse not better.

          I have no faith in Dick Cook's abilty to pick a good film property. The smartest move he has made was the distributorship with Dreamworks. But this deal was really made as a last resort. Touchstone is a joke right now. Miramax is a shaddow of it's former self.

          I think now Disney could be in a bit of trouble, I think the studio needs to pick up production. But I really don't see how they can do this with current managment. I don't see how they can regain enough capital to finance films. Ad revinue is plummiting. Iger has a problem.

          I would like to see the P/E get back to above 10 points. And I would like to see an increase in it's yeald, this will raise investment in the company. It is going to be difficult to do with an annual dividend - but I think it needs to be done. Combine this with a revamped management at the film studio, better direct to customer marketing channels for your media (retail stores are closing across the nation - I think the answer is better direct access to the customer), and I think you will be able to stave off this slumping economy. I also think they can't just cater to Steve Jobs, even if his health is in question... There needs to be more back and forth with Apple. Apple is sort of in flux at the moment, they seem to be repositioning under Papermaker. Developement of the iPod, I think is going to be limited in the future. What will help Disney the most is if Disney presses them to work on developing Apple TV to be a better platform.

          So I think Iger has a bunch of things he needs to chew on... the stock is under 18 right now, and it is likely to fall more in the near future. But focusing on restructuring Parks and Resorts without looking at the Studio, which historically has been a revenue driver but is no longer, is kinda nearsighted.

          Sorry this isn't that cheery, folks...

          Anyway, that is my 2 cents.
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