Disney said to cut jobs, plan less movies
Report says that movie giant will cut annual film production from 18 movies to eight.
July 12 2006: 4:42 PM EDT
LOS ANGELES (Reuters) -- Disney was tight-lipped Wednesday about a report that it plans to slash annual movie production by more than half and eliminate jobs to trim costs and improve shareholder returns.
The plan to sharply cut annual film production from 18 films to eight surfaced in an unsourced report in show business newspaper Variety
A Disney spokeswoman said the company would not discuss the Variety
article or comment on impending job cuts.
"We are constantly evaluating our business," Disney spokeswoman Heidi Trotta said Wednesday.
The move comes despite a record weekend box office run of $132 million for Disney's "Pirates of the Caribbean: Dead Man's Chest." Wall Street analysts this week had begun to review estimates for Disney earnings due to the blockbuster ticket sales. Variety
said all movies would be branded under the Disney logo, diminishing the role of its Touchstone and Miramax film divisions, which produce movies for older and art house audiences.
The studio also plans to "substantially" cut its workforce as part of an overhaul planned by Walt Disney Studios Chairman Dick Cook, the report said.
Cook has been working for several months on a plan to resurrect the studio division, whose year-over-year revenue comparisons have been down for the last four quarters. Variety
said the new overhaul would involve deeper cuts than previously anticipated.
Sanders Morris Harris analyst David Miller said Disney could stand to cut expenses, despite the ticket sales seen from "Pirates" or the animated feature, "Cars."
"The internal rate of return (for the studio division) is not shareholder friendly," Miller said. "Obviously, even though 'Cars' or 'Pirates' were big successes, the internal rate of return was insufficient."
But whittling down its movie slate does not necessarily mean the company will change its overall spending on filmed entertainment, he said.
"It really comes down to how do you want to allocate your capital," Miller said. "Do you want to allocate that over 18 films, in which the films cost less, or eight films that cost more? It could be that Disney sees a higher rate of return from tent pole films than from smaller films."
Tom Sherak, a partner at Revolution Studios and former chairman of 20th Century Fox Domestic Film Group, said studios are moving to cut films with "mid-range" budgets.
"The pictures that studios really get hurt on are the middle of the road films, not the big budget pictures," Sherak told Reuters. "The $50 to $60 million pictures that go out and gross $20 million. A big action movie that doesn't ... live up to its potential here, goes out and doubles its take internationally."
Shares of Disney
) fell 1 percent to $29.93 Wednesday on the New York Stock Exchange.
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