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LION'S SHARE; WALT DISNEY VIDEO SEQUELS MINING GOLD.

Byline: Dave McNary Daily News Staff Writer

Walt Disney Co. has decided small is beautiful.

The sequel to ``The Lion King,'' a worldwide box office giant five years ago, will be released in late October on a much smaller screen than the standard multiplex movie screen.

It's going direct to video.

But, Disney officials insist, don't think that ``The Lion King II: Simba's Pride'' will be of low quality just because it will appear in Wal-Mart, not Mann's Chinese Theater. In fact, analysts and company officials say, ``Simba's Pride'' represents the latest in a string of highly successful - and artistically satisfactory - direct-to-video films by the entertainment conglomerate.

In the '90s, it has released profitable direct-to-video sequels to recognizable properties like ``Aladdin,'' ``Honey, I Shrunk the Kids'' and ``Beauty and the Beast,'' along with a ``Winnie the Pooh'' feature.

Disney's ``Simba'' decision underscores the vitality - and growing inventory - of its direct-to-video business, which generates huge sales at relatively low cost while enhancing the Disney brand name.

Why is Disney so successful at a time when other studios' video sales business is flat? It certainly doesn't hurt that the Disney name is so trusted by parents to provide age-appropriate entertainment. And Disney certainly knows how to market its product to parents and children, making happy retailers who give Disney videos prominent shelf space.

Disney's expertise in prompting video store customers to buy videos rather than just rent them has been extraordinary. The market for buying videos, or ``sell-through,'' has grown from $3.5 billion six years ago to somewhere around $10 billion currently, driven by hits like ``The Lion King,'' ``Beauty and the Beast,'' ``Snow White,'' ``Toy Story'' and ``Aladdin.''

Industry trackers estimate home video is responsible for more than half of studios' overall revenues.

``Home video has been the ancillary window that saved Hollywood for the last several years,'' said analyst Jay Kim of Paul Kagan Associates.

Burbank-based Disney has taken the lion's share of that. Analyst Tom Adams estimated that Disney's revenues from domestic home video amounted to $2.57 billion in 1996, his most recent tally. That's 31.2 percent of Hollywood studios' cumulative cut from the industry.

``Disney has such a strong brand name that it transcends any worries that parents might have about content,'' said Barbara McNamara, an analyst with industry tracker Alexander & Associates. ``Parents look at a Disney product and automatically assume it's good for kids.''

So there's little surprise that the entertainment giant has been kicking direct-to-video operations into high gear in recent years as part of its Disney Television Animation operations, which also produce Disney's animated TV series and specials. The division now has more than 1,000 employees with animators at studios in Australia, Canada and Japan.

The goal is to release as many as four high-profile made-for-video titles annually by the year 2000 under the Disney Premieres nameplate. The reasoning is simple - it makes more financial sense to protect one of the Disney crown jewels by bypassing multiplexes, where a surprise hit like ``Titanic'' can doom rivals.

Disney decided four years ago to start making sequels to successful family properties and selling them directly to the video market, saving on production and marketing costs and generating huge profits. Kim called it a sound strategy because it simply offers parents more options to what's already an enormously useful franchise.

``Parents are on the lookout for videos that will baby-sit their kids, so that the kids will be fixated for two hours and the parents can get something accomplished,'' Kim said. ``There really isn't anything else that comes close to home video's economic value if you want to get housework done. So there's a healthy appetite for direct-to-video.''

COMING ATTRACTIONS

Disney's upcoming direct-to-video titles include ``Pocahontas II: Journey to the New World,'' due Aug. 25; ``Disney's Doug: The Movie,'' out in early 1999; ``The Hunchback of Notre Dame,'' due for the fall of 1999; ``Once Upon a Christmas,'' a trilogy for 1999 with Mickey, Donald Duck and Goofy; ``Another Goofy Movie'' for early 2000; and a ``Lady and the Tramp'' sequel.

According to Sharon Morrill, executive vice president of TV animation, another 40 projects are in development.

``We are planning out to 2001 and are constantly looking ahead,'' she said. ``Although most of what we do is sequels, we are also trying to push the envelope in terms of look and style.''

Disney's commitment to home video comes in the wake of general flatness in the industry, which saw rentals fall 3 percent and sell-through decline 10 percent last year, according to Alexander & Associates. McNamara estimates rentals are up 5 percent so far this year while sell-through has edged down 1 percent.

``Even though studios are stepping up their releases, there continues to be strong demand for children's product,'' McNamara said. ``I think the market can definitely bear more.''

Disney executives insist they are not cutting corners when they work on direct-to-video projects, hiring the top voice and technical talent. ``Our marching orders were that it's to be done with the same quality as a feature film,'' said Alan Zaslove, producer of ``Pocahontas II.'' ``That protects its archival value when new technologies like DVD come to market.''

The project, loosely based on the real-life tale of Pocahontas going to London, has been in the works for three years. ``It's going to be beautiful and it will definitely hold up,'' said director Brad Raymond, as he supervised final sound editing recently. ``In one of our songs, there are over 100 characters, which is one of the most ambitious things ever done in animation.''

Work on ``Simba's Pride'' began 18 months ago with a story focused on Kiara, the daughter of Simba, and Kovu, the son of Scar. Scrutiny from executives has been exceptionally high, reports director Rob LaDuca. ``We've got some big shoes to fill,'' he notes.

HIGH SCORES

The first test groups, made up of mothers with children aged 3 to 11 viewing mostly black-and-white animation, were held last November. ``The scores from the focus groups have been really high,'' said Darryl Rooney, director. ``They help toward resolving key issues.''

Marketing for ``Simba's Pride'' has already started. A music video for it aired during ``The Lion King'' showing on ABC last month, and a promo was attached to the ``Flubber'' video.

``What we've found is that moms want more family movies; kids just want to know the rest of the story,'' said marketing executive Robert Chapek. ``The challenge on direct-to-video is that the titles are not going to be at the top of people's minds so we have to work on that. We ask them to recall the fond moments from the originals.''

All this hasn't gone unnoticed by Disney's rivals. 20th Century Fox sold an estimated 5 million copies of its first direct-to-video title, ``Casper: A New Beginning,'' last fall and has two more projects in the works; Universal has sold 20 million copies of four ``Land Before Time'' videos and has started work on four other made-for-video projects.

Still, no other studio has the brand loyalty as Disney.

MARKETING MUSCLE

Pasadena resident Kathy Register said her 5-year-old twin boys watch Disney animated home videos - ``The Lion King,'' ``Aladdin,'' ``The Jungle Book,'' ``101 Dalmatians'' - repeatedly.

``We don't let them watch very much TV, but the Disney videos are fine and they really love them,'' she said. ``I can't even estimate how many times they've watched `The Jungle Book'; it's certainly dozens and dozens. They get very excited about Disney videos because the marketing on it is huge. They know what they want.''

For a major player like Disney, home video is a gold mine. The economics are fairly simple - it costs $4 to duplicate a tape; wholesalers pay about $12 per copy; retailers pay a few dollars in mark-up and then sell the tape for about $20.

So Disney's strategy of expanding made-for-video titles is a way to expand profits, according to Kim.

Although direct-to-video now seems like an obvious strategy, many observers were skeptical over Disney's first attempt in the category four years ago when it released ``Aladdin'' sequel ``The Return of Jafar,'' since it lacked the voice of Robin Williams. Customers might perceive the video as a lesser-quality product, the thinking went.

Instead, ``The Return of Jafar'' was a smash hit that sold more than 10 million copies, enough to generate around $100 million of pure profit. Until then, direct-to-video had been viewed as a backwater catch-all for movies not good enough for theatrical release.

``My daughter Katie watched `The Return of Jafar' to death,'' said Rick Manly, an Altadena resident with a 9-year-old daughter and a 12-year-old son. ``When Disney released it, direct to video really lost the curse of being cheesy. Katie certainly didn't think it was second string.''

Disney executives concede they remain aware that the stigma of direct-to-video has not been completely erased. And they say that's part of what drives them to make certain the product lives up to the hard-to-define Disney quality standard that makes titles attractive to more than just children.

``Direct-to-video has always been an area that was perceived to have a lot less value, although I think we've changed that,'' Morrill said. ``We are making these as top quality, as if they could be shown in theaters because I never want the product to play down to 2-year-olds. I want it to be something that the older brother and the parents can also enjoy.''

ANOTHER DISNEY EXPANSION

Walt Disney Co.'s 4-year-old direct-to-video business operates as part of the entertainment giant's TV Animation division.

1984 - Inception of Walt Disney TV Animation

1989 - TV Animation studios opened in Australia, Japan

1994 - ``The Return of Jafar'' released as Disney's first direct-to-video movie

1995 - TV Animation announces it will open studios in Toronto and Vancouver

1996 - ``Aladdin and the King of Thieves'' is released

1997 - ``Pooh's Grand Adventure: the Search for Christopher Robin'' released

1997 - ``Beauty and the Beast: the Enchanted Christmas'' released

1998 - ``Pocahontas II: Journey to a New World'' scheduled for release

1998 - ``The Lion King II: Simba's Pride'' scheduled for release

1999 - ``Disney's Doug the Movie: the Mystery of Lucky Duck Lake.''

1999 - ``The Hunchback of Notre Dame Deux: the Secret of the Bells.''

1999 - ``Once Upon a Christmas'' set to be released.

2000 - ``Another Goofy Movie,'' ``Lady and the Tramp: Scamp's Adventure''

HOME VIDEO HITS

Walt Disney Co. has released most of the best-sellers in home video, including the top five of all time.

Title, year of release, estimated units sold

1. ``The Lion King,'' 1995, 30 million

2. ``Snow White and the Seven Dwarfs,'' 1995, 25.5 million

3. ``Aladdin,'' 1993, 24 million

4. ``Beauty and the Beast,'' 1992, 22 milion

5. ``Toy Story,'' 1996, 20 million

CAPTION(S):

2 Photos, Box

PHOTO (1--Color) ``The Lion King II: Simba's Pride,'' the sequel to Walt Disney's blockbuster ``The Lion King,'' will be released in late October direct to video.

Photo Courtesy Disney

(2) Rob LaDuca, left, co-director of ``The Lion King II: Simba's Pride,'' looks over prints with producer Jeanine Roussel and director Darrell Rooney.

Gus Ruelas/Daily News

BOX: HOME VIDEO HITS (see text)
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Copyright 1998, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

 
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Title Annotation:BUSINESS
Publication:Daily News (Los Angeles, CA)
Geographic Code:1USA
Date:Jun 7, 1998
Words:1854
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