Disney reported its fiscal first-quarter net profit fell 32% to $845 million, or 45 cents per share, from $1.25 billion, or 63 cents per share, in last year’s first quarter. The economic downturn plays a strong role, but the company is also seeing a trend away from network viewership and DVD purchases as increasing digital media choices are now available.
Citizens (I dislike the word “consumer”) are reducing expenses and changing behavior. Big business models will have to adjust quickly to the new era.
From the Associated Press:
An aging DVD format and a proliferation of viewing options hurt home-video revenue in ways that could not be blamed solely on economic decline, [CEO Robert] Iger said. Studio revenue fell 26 percent from a year ago.
“The average U.S. DVD household owns about 80 DVDs already,” Iger said. “That suggests that, economy or not, going forward people potentially will be more selective about what they buy.”
He said that the abundance of viewing choices had also hurt the ABC broadcast television unit “and may have a long-term potential impact on the DVD business.”
Analyst Anthony DiClemente of Barclays Capital said it was the first time Iger publicly acknowledged that the consumer shift from physical media consumption to digital was beginning to affect Disney’s businesses. The shift has already plagued the newspaper and recorded music industries.
“The fundamental trends are on a slippery slope to the downside,” DiClemente said after the call.
Analyst Alan Gould of Nataxis Bleichroeder Inc. echoed the concern.
“Those comments are a bit scary, frankly,” Gould said. “DVDs, for the last 10 years, have been such an integral part of the profit stream of a movie. If you have DVD sales slowing down dramatically on a secular basis, that changes the whole economic structure of the motion picture business.”