Studio shake-up reflects changing Hollywood

LOS ANGELES, Romain Raynaldy - Management shake-ups at movie giants Universal and Disney reflect the industry's difficulty in adjusting to the digital age and failure to halt sliding DVD sales, analysts say.
In the space of a few weeks, Disney has shown the door to its respected and long-serving chairman Dick Cook while Universal wielded the axe on co-chairmen Marc Shmuger and David Linde on Monday.

Studio shake-up reflects changing Hollywood
"These shifts expose a serious stress that is bubbling to the surface throughout the entertainment industry, and especially theatrical motion pictures," said Jason Squire, a film industry expert at the University of Southern California and editor of "The Movie Business Book."
"At this transitional point between traditional media and new media, the need for a revised business model for motion pictures may be at the heart of some of these changes."
As young consumers increasingly turn to the Internet, mobile phones or video games as sources of entertainment, studios could no longer look to cash in on DVD sales, said Brandon Davis, president of the website.
"DVD is no longer the savior it used to be," he said. "Studios do need to adapt a strategy to continue to make a lot of money in the home video market, and more generally in all the post-theatrical market."
According to figures from Digital Entertainment Group, sales of DVDs tumbled by nine percent in 2008 and nosedived by 13.5 percent in the first six months of 2009. The freefall presents a problem for studios, which rely on DVD earnings to maximize profits.
Disney's decision to replace Cook with Rich Ross -- the former chief of the televised Disney Channel -- signaled an intent to return to basics, according to analyst Gitesh Pandya of
"At Disney, I think they are going to streamline more and try to focus more on the films they do well: family films," Pandya told AFP.
"One thing we have seen this year is that 3D cinema has become huge, and Disney certainly wants to continue to be a major player in that."
Producer Mark Gill, chief executive of The Film Department and former president of Warner Independent Pictures, said Ross's arrival indicated Disney were planning to focus attention on all areas of the empire.
"You can see they wanted somebody who could work with all parts of the company so they can do well in merchandising, in television, online -- not just in the studio," Gill told AFP.
During his reign at the Disney Channel, Ross presided over the phenomenally successful teen franchises "Hannah Montana" and "High School Musical."
But Squire said the multi-faceted franchise strategy carried certain risks.
"These (franchises) are potentially lucrative, but also risky, because we don't discuss the Disney efforts in similar franchises that have not succeeded as well," he said.
At Universal meanwhile, the changes announced this week follow a disappointing summer at the box office where big-budget productions such as comedies "Land of the Lost" and "Funny People" flopped.
Universal's share of the box office has fallen to just 8.5 percent, significantly trailing the other majors -- Warner Bros, Paramount, Columbia, Fox and Disney.
According to Gill, Universal's woes can be traced back to the problem affecting all major studios of soaring overheads.
"The costs of the major studios are still far too high for the market," he said. "The studios need to cut costs by more than 50 percent and they won't be able to do it. Their costs are way out of the line."
"Two reasons: the habits, they are so used to paying a lot of money for everything. The other one is fear. They are afraid that if they cut costs, they won't be able to compete. But they don't have a choice."

Monday, October 12th 2009
Romain Raynaldy

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