JUNE 13 | Increased video-on-demand offerings through cable companies and online are starting to cut into the video rental business, Walt Disney Co. senior VP and chief financial officer Tom Staggs told analysts at the Deutsche Bank Telecom and Media Conference Tuesday.
“I think that physical rental will continue to occur, but so far, it looks to me like you’ve got a cannibalistic effect that, at the end of the day, I don’t think hurts the overall marketplace,” Staggs said. “It certainly hasn’t hurt overall revenues for us.”
He said that because of its extensive library, the studio is insulated from declines in the rental market.
Staggs added that it’s still convenient for people to watch a movie on a DVD.
“But when you talk about a rental experience, that model’s going to continue to shift, I think,” he said.
Staggs said the company is seeing stability in sales and pricing of video this year.
Although the company will be aggressive in adding distribution through new technologies, Staggs acknowledged that most of the growth in the next few years will come from traditional distribution models.
Earlier at the same conference, 20th Century Fox chairman Peter Chernin said the sky isn’t falling in home entertainment despite slowing DVD sales.
“Certainly the business is getting a lot harder, where we are seeing marginal titles and marginal catalog not performing as well," he said. "You will begin to see growth because of high-definition DVDs."
"There will be several hundred million [dollars] in high-definition sales in 2006, and a little over 1 billion in 2007,” Chernin said. For Fox next year, “that's a couple of hundred million in incremental revenue."
He estimated that consumers will likely replace three to five of their favorite movies a year with a high-def format. Fox also should benefit from improved profit margins, with high-definition new releases priced relatively steeper than standard-def titles.