Home Media Magazine - February 16-22, 2009 - (Page 24) NEWS Image Posts Q3 Profit, Stock Doubles on Merger Greenlight By Erik Gruenwedel SUPPLIER Image Entertainment defied a challenging economy when it reported third-quarter (ended Dec. 31, 2008) net income of $304,000, compared to a loss of $2 million during the prior-year period. The Chatsworth, Calif.-based distributor posted a 43% revenue growth to $39.2 million, compared to revenue of $27.3 million during the prior-year period. Best-selling DVD releases for Image in the quarter included Jeff Dunham: Very Special Christmas Special, www.homemediamagazine.com Stuck, The Who: Live at Kilburn 1977 and Ghost Hunters: Season 4 Part 1. Image president David Borshell, in a call with analysts, said the company had already achieved its two primary goals in fiscal 2009: to increase revenue and generate positive operating and net income. He cautioned, however, that Image was not immune to the recession and that it was in the midst of evaluating internal operations and costs going forward. “We will be the first to state that we do need to find ways to drive stronger bottom-line results,” he said. He said that despite widely reported retrenchment by the major studios, Image had managed to carve itself a “nice position” in the industry. “We intend to preserve and grow it,” Borshell said. Specifically he was referring to the company’s successful strategy of acquiring and distributing independently produced, cast-driven feature films that excel at retail, despite falling below the radar of the major studios. Examples include In the Electric Mist, with Tommy Lee Jones, streeting March 3 on Blu-ray, DVD and digi- tal, and The Last Word, with Winona Ryder and Ray Romano (April 21). Shares of Image stock skyrocketed after the company announced that it had received the final $1.3 million installment of a $1.8 million business interruption fee, indicating that the planned $100 million cash acquisition by Nyx Acquisitions would go through, pending shareholder approval. The deal appeared in doubt when San Francisco-based Nyx failed to deliver the $1.3 million payment by a Jan. 20 deadline. The deal is expected to close Feb. 26. ‘Bottle Shock’ Uncorked LA T E FL AS HE S I JANUARY GAME SALES UP The hardware next-generation battle didn’t change much in January, though sales took a customary dip from the holiday season, according to U.S. data from The NPD Group. Nintendo’s Wii, Microsoft’s Xbox 360 and Sony’s PlayStation 3 finished in that order, in terms of sales for the month. The PlayStation 3 sold approximately 203,000 units to Xbox 360’s 309,000 in January 2009, with Wii far outgunning both once again at approximately 679,000 units sold. Game hardware sales for the month totaled $445.4 million, up 17% from January 2007. Video game software sold $676.6 million, up 10% from the same month the year before. — Stephanie Prange Lionsgate Hurt by a Poor Theatrical Slate Continued from page 1 I PIONEER CUTS JOBS, WILL EXIT PLASMA BIZ After posting a fourth-quarter loss of more than $290 million, Japanese electronics company Pioneer announced Feb. 12 that it would slash 10,000 jobs worldwide and withdraw from the plasma-display business by 2010. The drop in demand for plasma displays will also result in Pioneer shutter— Chris Tribbey ing two factories. The Spirit, Punisher: War Zone and Transporter 3 underperformed. “The primary factor contributing to this quarter’s loss was the underperformance of our feature-film slate,” said Lionsgate co-chairman and CEO Jon Feltheimer. The Santa Monica, Calif.-based mini-major’s home entertainment revenue from all segments, including electronic, declined 11%, to $101.5 million, from $114.6 million last year. Again, Lionsgate blamed the lack of high-profile new theatrical releases on DVD in the quarter for the decline. Significant disc titles in the quarter included Beer for My Horses and previous-quarter releases Rambo, The Bank Job, The Forbidden Kingdom and War. Lionsgate said it slated the DVD releases of theatrical titles Saw V, Tyler Perry’s The Family That Preys, Bangkok Dangerous, My Best Friend’s Girl and Transporter 3 for the beginning of the year to avoid the glut of major studio releases prior to the holidays — a problem in previous years. Steve Beeks, president and co-COO of Lionsgate, said the home entertain- ment results improved in every segment, except children’s. He said the studio’s home entertainment market share hit a record 6.7%, compared to 5.6% the previous year. He admitted the market for packaged media remained challenging but attributed it more to the economy and film releases than erosion of the DVD market. Beeks said the studio’s home entertainment revenue for fiscal 2009 would exceed that of 2008. Lionsgate should generate $273 million in library disc revenue this year, which is $30 million less than previously budgeted, he said. He said digital distribution and Blu-ray Disc continues to generate significantly higher margins, with high-definition packaged media representing 10% to 15% of Lionsgate’s new-theatrical-release revenue. The studio cited underperformance with its HIT Entertainment DVD distribution deal. It took a $20 million charge on the underperforming unit. “We’re not satisfied with these results, “ Beeks said. He said home entertainment revenue could decline 10% to 15% in fiscal 2010 due to the underperforming theatrical slate. Bottle Shock writer and director Randall Miller and his wife and co-writer Jody Savin attended the Feb. 5 James Beard Foundation dinner at The Peninsula Hotel in Beverly Hills, Calif. The two spoke about the film and touted its recent DVD release from 20th Century Fox Home Entertainment. Viacom Q4 Continued from page 1 DTV Transition Delay Signed Continued from page 1 coupon program for digital converter boxes, has more than 3.5 million people on the waiting list for coupons. The stimulus bill working its way through Congress includes more than $600 million to replenish the program. But if the coupon program does get funding, and if people with coupons already in hand join the millions waiting for coupons and buy digital converter boxes, the Consumer Electronics Association (CEA) estimates that retailers could run out of the boxes quickly. Disney Gets DreamWorks Continued from page 1 current DVD distribution agreement with Universal Studios Home Entertainment at the end of the year. Walt Disney Studios Home Entertainment would assume global distribution of DreamWorks packaged media, except in India, according to a Disney spokesperson. Paramount Home Entertainment continues to separately distribute DreamWorks Anima- tion packaged media, according to the studio. Universal Studios, which had been negotiating a distribution deal with DreamWorks, the studio co-founded by Steven Spielberg, Feb. 6 acknowledged the end of discussions. “It is clear that DreamWorks’ needs and Universal’s business interests are no longer in alignment,” the studio said, in a statement. Under the new pact, Disney will handle distribution of about six DreamWorks mov- ies annually under its Touchstone Pictures banner. It would also make available a $175 million loan to DreamWorks that reportedly can be accessed only if Spielberg raises $325 million in debt financing, according to the Los Angeles Times. The movies will be produced in association with Reliance Big Entertainment, the Indian-based conglomerate that last summer entered into a $1.25 billion co-financing deal with Spielberg and partner Stacey Snider, CEO of DreamWorks. “We now estimate that U.S. retailers have inventory of between 3 million and 6 million DTV converter boxes,” Michael Petricone, CEA SVP of government affairs, wrote in a letter to the FCC. “The worst-case scenario is that there are only 3 million boxes in current inventory and daily redemptions stay at 115,000. We will then run out of box inventory by the end of February. … We believe that there is a possibility that we may have a temporary shortage in February or March.” Because manufacturers of the boxes may have stopped producing them in anticipation of Feb. 17, they may have to restart production knowing how many people are on the NTIA waiting list, Petricone concluded. On the broadcast side, local TV stations that prepared for the digital transition to occur this month may go ahead and shut down analog broadcasts, if at least one news station in their market will continue to broadcast via analog, according to the FCC. The FCC told The Associated Press that 491 of the more than 1,700 full-power stations nationwide have asked to shut down analog broadcasts Feb. 17. The company attributed the quarterly decrease in home entertainment revenue to “the industry-wide decline in the home entertainment market in the fourth quarter.” “It was a difficult year for everyone,” said Philippe Dauman, president and CEO of Viacom, in an earnings call. “Despite the orgy of pessimism of late, the tide of the economy and our industry will rise again.” He blamed the home entertainment decline in the fourth quarter on the economy and titles, rather than a sea change in consumer habits. “As it’s been widely discussed in the past week, home entertainment was hit by the soft retail environment,” Dauman said. “In the fourth quarter, we saw the conversion rate of box office to home entertainment soften. … The decline in home entertainment revenue will continue for a while. … On a going-forward basis, the economy will be the most significant factor [in terms of DVD sales].” He also noted home entertainment was down in the fourth quarter partly because Paramount didn’t have releases as strong as Shrek the Third or Transformers, which came out on video in 2007. Viacom slashed nearly 900 jobs in December to help see it through the current recession. Dauman also spoke to studios experimenting with same-day VOD and DVD releases, saying it was “mostly with the smaller titles.” HOME MEDIA MAGAZINE (ISSN 1934-9882) is published weekly 52 times per year by Questex Media Group, http://www.homemediamagazine.com
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