DISNEY SPLICES TOGETHER HOME VIDEO OPERATIONS.

Byline: Dave McNary Daily News Staff Writer

Walt Disney Co. announced Thursday it has combined its lucrative U.S. and international home video units into one division and will lose its top video executive later this year.

Ann Daly, credited with building Disney's home video into the dominant force in the industry over the past five years, will leave her post as president of Buena Vista Home Video in September. Michael Johnson, who has worked on the international video side since 1986, will take over the merged business, named Buena Vista Home Video Worldwide.

Disney generated $4.5 billion in 1996 home video sales, according to Tom Adams of Adams Media Research of Carmel. Under Daly's leadership, domestic video revenues have grown from $1.25 billion in 1993 to $2.7 billion last year.

Adams said rumors about Daly's departure emerged several weeks ago. A Disney spokesman said the 40-year-old Daly has not indicated where she is going. She is expected to be heading to DreamWorks SKG to rejoin former Disney studio chief Jeffrey Katzenberg or 20th Century Fox, where the film studio is headed by former Disney video chief Bill Mechanic.

``Ann Daly cuts a very bright figure,'' Adams said. ``During her tenure, Disney has come up with very innovative ideas for expanding home video revenues when it was conceivable they would stay flat after Mechanic left.''

The areas tapped by the Burbank-based entertainment giant include repackaging of collections from its massive library; extending distribution into such venues as supermarkets; signing up promotional partners such as McDonald's; increasing the number of releases, particularly in the family market; and entering the direct-to-video business with sequels to ``Aladdin'' and ``Honey, I Shrunk the Kids.''

Major successes in recent years include the top sellers of all time: ``The Lion King,'' which sold 30 million copies; ``Snow White and the Seven Dwarfs,'' 25.5 million; and ``Aladdin,'' 24 million.

For his part, Johnson oversaw a business that generated $1.8 billion in sales last year with a 50 percent share of the international home video business in 80 markets.

Adams said the home video market has plenty of room to grow, both domestically and internationally, with consumers becoming increasingly interested in owning videos rather than merely renting them. He also said that foreign markets such as China, India and the republics of the former Soviet Union could prove attractive to Disney if it can solve the current problem of pirating of videos in those markets, possibly if digital video disc machines begin to catch on.

Home videos are among the most profitable parts of the movie business. Distributors such as Disney usually wholesale the tape at 60 percent to 70 percent of retail price and its costs of manufacturing and marketing run from $4 to $7 per tape.