DISNEY IN NO HURRY FOR NEXT-GENERATION OPTICAL DISC, EISNER SAYS

Eisner admitted that “we actually pray” the next-generation optical carrier arrives “a couple of years later than some people are projecting because we'd like to be able to get through our old library” of films on DVD and “start all over again” when the next optical disc arrives. Because Disney is “conscious of a date” when Blu-ray or HD-DVD is introduced and “may start to get some mass distribution,” his company has begun “adjusting our release schedule appropriately” for movies on DVD. But he said the company was trying to be careful “not to oversaturate” the market with DVD releases. Disney executives again stressed that DVD’s successor will be a “substantial” improvement over DVD -- not only because it will offer better resolution, but also because it’s expected to offer a considerably more secure system to thwart piracy.

Disney indicated last month at the IRMA Recording Media Forum in La Quinta, Cal., no preference yet between Blu-ray and HD-DVD (CED March 22 p1). It was there Buena Vista Home Entertainment Pres. Bob Chapek speculated the window of opportunity for launching the next-generation optical disc might open 4th quarter 2006 and close a year later. But Eisner said last week next-generation discs might not be marketed in force until 2007 or later. He said the timing “has to match the sale of the high-definition TV sets” and the next disc won’t attract strong interest until a substantial number of consumers own an HDTV product.

Disney COO Robert Iger told the same analyst meeting that although PVRs were viewed as “a threat” to broadcasters and advertisers, they should spur more TV viewing. He said Disney had “done some preliminary research” on how PVRs impacted advertising. The “good news,” he said, was that “we all seem to be in this together” and advertisers and broadcasters seemed to be on the same page. He said “if the PVR may put advertising in its traditional form in peril, the advertisers realize that they need to figure out a solution -- just as those that are selling the time on their networks need to figure out a solution.”

Iger predicted that we're “going to see dramatic growth in PVRs,” noting that he saw “figures as high as roughly 25 billion installed PVRs in some form or another by the end of 2006.” That meant PVRs were “likely to change the way people access television” and were “going to require much greater cooperation and dialog with advertisers to figure out how [advertising] can be effectively embedded in TV,” he said. Disney believes merely boosting the number of product placements in TV shows won’t make up for the loss of traditional commercials and “most advertisers seem to agree,” Iger said.

Eisner said technology such as PVRs “enhances content and people figure out how to use that technology to enhance entertainment in some way.” PVRs, he said, weren’t just for skipping ads. The company noted that viewers do like to watch certain ads and suggested that one way to encourage viewers to watch them was for advertisers to make them as entertaining as the typical Super Bowl commercial. Eisner said “history has proved that new technology does not eliminate the old distribution systems -- it simply takes away the gate keeper, monopolistic [element] of it.”

Discussing obstacles that Disney’s ABC and other TV networks face competing with other entertainment now, Iger said “we've seen a dramatic increase in time spent” among those who play videogames. Eisner said that when the company’s executives and board members get together on strategy, “I'm sure we'll have a lot of discussions about the videogaming business.” He said “it’s a business that we're in in a tiny way” now and the question was “should we be in it in a bigger way?” Disney’s Buena Vista Games interactive division creates, markets and distributes video and computer games under the Buena Vista Interactive and Disney Interactive publishing labels. The division also licenses properties and works directly with 3rd- party publishers to create titles. But the company has yet to make a major impact in the game arena on its own despite its strong brand name. One of the more successful recent videogames based on a Disney property was Finding Nemo, but that was published by THQ.

Separately, Activision COO Ronald Doornink told the Banc of America Securities Consumer Conference in N.Y.C. last week his company expected “a beneficial effect of continued hardware price cuts” on game consoles. Unlike Electronics Boutique at the same conference (CED April 1 p7), which said it expected a PS2 price cut from Sony by E3 Expo in May to follow Microsoft’s $30 price cut last week on Xbox (CED March 30 p4), Doornink said Activision believed a move by Sony might not come until Sept. At the same conference, Take-Two Interactive CEO Jeffrey Lapin said his company still didn’t plan to exhibit at E3 Expo this year. Take- Two Exec. Vp Cindi Buckwalter also told the conference the company was already “starting development on some products” for Sony’s upcoming PSP handheld game system and “we'll have more to say about that in the near future.”