Posted by: Ron Grover on October 17, 2009
Trust Bob Iger to tell it like it is, while the rest of Hollywood sugar-coats the obvious. The Walt Disney Co. (DIS) CEO, who first broke ranks with fellow media moguls to say that falling DVD sales was due to more than just the recession, now is sounding warning signals that DVD’s next generation Blu-ray discs also may fall short of the mark.
Speaking before a gathering of lawyers at a symposium at USC today, Iger all but predicted that Hollywood’s hopes for a boost in DVD sales from the new high-definition discs could never offset the continued fall of traditional DVD sales. His reasoning: folks who love to collect DVDs already have 80 or so in their libraries, the new Blu-ray machines are “backward compatible” (meaning that they can play the standard DVDs) and folks simply aren’t going to go out and replenish those libraries as they did when the DVDs first replaced VHS tapes. “We have seen some but not as much as we would like,” he told the gathering.
Try to get other executives in Hollywood to say the same thing. But then again, Iger seems to have a far more realistic outlook for the film business anyway. The business of making films and other entertainment, he says, has fallen prey to the many more choices that folks have to entertain themselves these days. As proof, he trots out the experience of his 11 and seven year old sons, who he says “are the best laboratory I know.” His kids, he says, would be just as happy to “play free casual games all day long.” Other folks have even more things to divert their attention, he says.
That puts the entertainment business in the unenviable position of facing up to the fact that “the opportunities to monetize its content are not what they once were.” Yup, Bob, you said it. DVD sales this year are likely to be off more than 9%, continuing a slide that began two years back. If Iger’s right, those sales won’t likely fully return. And no one thinks that online sales of movies will make that up anytime soon.
That’s a big problem. Sales of those shiny discs, which carry humongous profit margins, have always been the great equalizer for studios whose executives have become addicted to spending big to produce and market films. A few years back, if a film flopped at the box office, it might still make back a chunk of its expenses on DVD sales.
No more, Iger seems to be saying. That why, he says, he began a major overhaul of Disney’s studio. It produces fewer films, is looking to keep costs down, and has focused of brand name producers who cut through the clutter of other filmmakers and might even bring gamers like his sons to the movie theaters. Since taking over as CEO four years back, Iger bought Pixar, has a deal pending to buy Marvel(MVL), and has struck a deal to help finance films made by superstar director Steven Spielberg’s newly reconstituted DreamWorks studio.
Those outlets produce the kind of “brand name” films that folks go the movie theater to see, Iger told the USC gathering. “I don’t think people go to see a film that’s made by Warner Brothers (TWX),” he says, “but they’ll go to a film that’s been made by Disney, or Pixar or Marvel.” That’s likely true. And, if Iger’s right (and I’m betting he is), folks might just also buy some of those shiny new Blu-ray discs.
The media, entertainment and marketing worlds continue to shapeshift on a near-daily basis, as new forms arise and old assumptions erode. Where is it all going? No one really knows. But on this blog BusinessWeek’s media writers Tom Lowry and Ron Grover promise to provide ample helpings of scoop, provocation, and sharp analysis as they track and annotate this constantly changing terrain.