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Disc return snafus cause studios grief

Pixar revised guidance to leave bigger cushion for 'Incredibles' returns

The question of DVD opening weekends has become especially pertinent at DreamWorks Animation, where a massive homevideo opening weekend in November followed by big returns in the winter for “Shrek 2” led the company to report essentially no sales in the first quarter, revise its financial guidance, and face a Securities & Exchange Commission investigation and investor lawsuits.

That has led many on Wall Street and in Hollywood to question topper Jeffrey Katzenberg’s mastery of his new CEO responsibilities, as he promised investors more DVD sales than he was able to deliver.

In June, however, some questioned whether return rates have become a bigger problem, at least for animated family pics, when Pixar revised its guidance — albeit much less than DreamWorks — to leave a bigger cushion for returns of “The Incredibles.”

But homevideo execs say that returns haven’t become a bigger problem for them. If anything, they say, it’s less of an issue than it used to be.

More accurate financial models let them predict a DVD’s total take within the first week about as accurately as opening weekends for a theatrical release, they note.

And improvements in logistics let them get fresh supplies into stores like Wal-Mart as quickly as a day, so they don’t have to produce as many discs up front and leave themselves vulnerable to big returns of a disc underperforms.

Katzenberg and Pixar topper Steve Jobs haven’t come up with reasons for why their predictions turned out to be off.

Industry insiders have suggested, though, that Pixar’s problem may come from international markets where Disney released “The Incredibles” and sales data didn’t come in promptly, as well as a desire to stay on the safe side and avoid the problems of its biggest competitor.

As for DreamWorks Animation, most homevideo execs say they’re baffled at what happened to “Shrek 2” and chalk it up to hype that was bigger than reality.

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