Disney to take $50 mil hit on tabled pic

Mouse CFO Jay Rasulo: Writedown will come next quarter

Disney will take a $50 million film writedown in the September quarter for stopping work on an untitled stop-motion pic helmed by Henry Selick.

“We are taking a specific writedown at the studio of $50 million, or 2¢ a share, for some work we discontinued after taking a look at it,” said Disney chief financial officer Jay Rasulo at the Bank of America Merrill Lynch conference today. “It will be a short-term, fourth quarter impact,” he said. He didn’t name the work, but people close to the company confirmed that it was Selick’s pic, shut down in August and formerly scheduled for release next year.

Variety reported in August that the pic would stop production (Daily Variety, Aug. 15). It was among the first major decisions made by Alan Horn after replacing Rich Ross as chairman of Walt Disney Studios in June. Ross left after Disney reported a $200 million writedown from “John Carter of Mars.”

Rasulo called Horn “a great guy” and “an experienced veteran” and told investors not to expect any fundamental change in Disney’s film strategy of releases that can successfully extend and build brands. “If you look at the kinds of projects we are working on, every one of them fits into that category,” he said. Horn is focused on the moviemaking and on examining the studio’s size and efficiency.

In TV, he said the fast-growing Disney Channel, which has successfully challenged Nickelodeon for tots’ eyeballs with shows like “Phineas and Ferb” and “Doc McStuffins,” may well have become Disney’s biggest international franchise. “Our strategy is to expand it and get it deeper and deeper around the world in a multichannel way.”

He was also upbeat about Disney’s newly revamped and expanded parks. And he sees strong retail sales this holiday season from merchandise based on Marvel characters Spider-Man and the Avengers, led by Iron Man, as well as Disney’s “Brave” princess Merida. “When a new princess is added to the mix, it definitely lifts the whole thing,” Rasulo said.

In response to a question about the impact of Europe’s economic woes, he said, “It’s hard, I think, for any company to avoid the headwinds that seem to be persistent in Europe,” where Disney has a big business. He’s optimistic that experienced managers can draw on long consumer relationships and strong product to keep things steady, “or batten down the hatches when necessary if the headwinds get too strong.”

Rasulo revealed that U.S. advertising was weaker than expected in the current fourth quarter that ends in September, in part on lower ratings over the summer. But the dip isn’t following into the first quarter, where ad numbers look solid based on what’s been sold and other metrics. “We did not see the kind of rebound after the Olympics that we thought we would see… It’s a little lighter. (But) we do not see that persisting.”

He attacked startup service Aereo, which is in active litigation with major broadcasters, and said Disney is confident of its position and looking forward to making a case in court. The new service lets consumers capture and watch network shows using tiny antennae it provides. CBS chief Leslie Moonves, at the same conference earlier this week, piled on another nascent threat, Dish Network’s Auto Hop. This feature of the Hopper DVR makes it easier than ever for viewers to skip ads on primetime network shows.

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