Two weeks ago it was Dick Cook who was fired, telling his troops on a Friday afternoon that he was stepping down as head of the Walt Disney (DIS) studio. Today, it?? Universal Pictures?co-chairs Marc Shmuger and David Linde who were sent packing, being replaced by marketing and distribution chief Adam Fogelson as chairman and productiuon chief Donna Langely as co-chairman of NBC Universal’s (GE) film studio.
The exits by Shmuger and Linde were hardly unexpected, as Cook’s had been. The two Universal top execs have been on Hollywood’s hit list for months, the result of a string of box office misfires that included such yawners as the Julia Roberts’ romantic thriller Duplicity and the over-budget Johnny Depp flick Public Enemies. But you have to scratch your head at the press release announcing the shakeup. It includes a quote from Universal chairman Ron Meyer thanking his two departing movie moguls for their prior service that included “our two most profitable years.”
Was there ever a more convincing statement of the current Hollywood mentality, where crashing DVD sales have made corporate executives ever more skittish about the performance of their movie studios? Those two “most profitable” years for Universal weren’t that long ago — in 2007 and 2008, in fact — but the Universal shakeup unmistakably shows that future for Hollywood executives is now.
The reason for Hollywood’s current crisis of confidence is all about its DVD sales. Those shiny discs have in recent years bailed out over-budget films and box office misfires. DVD sales can account for 40% of a film’s revenue, and more than one film disaster has gone onto profitability by selling those movies as DVDs. No more, it appears. More and more consumers are renting DVDs, though mail order service Netflix (NFLX) or video vending machines, and are resisting the urge to plunk down $19 a pop to buy them. The message to Hollywood suits: if films don’t perform at the box office, that will drag down earnings not only for this year but maybe next year, too.
Dick Cook, it appears, found that out at Disney, where he was said to be too slow to adopt new technologies that might have bcome a new revenue source for Disney flicks. His likely successor is Rich Ross, president of Disney Channels Worldwide. That announcement could come any minute. Ross, who is credited with helping to produce Disney Channel TV shows like High School Musical and the Jonas Brothers efforts, knows how to make content that is relatively inexpensive compared to the mega-budget films that studios ususally churn out. In a movie world where profits are harder and harder to come by, cheaper suddenly looks pretty good.