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That said, please remember that we are in the entertainment business.
We produce entertainment experiences that, over time, become more
and more valuable. Consider just one of our company’s products
– a theme park ride called Pirates of the Caribbean.
Back in 1967 when the ride opened, it represented a “capital
cost” that was rather expensive, to be sure. But it also was
an instantly successful addition to Disneyland. It much more than
recouped its investment and is still one our most popular attractions.
It went on to be duplicated and enhanced at our parks in Florida,
Tokyo and Paris. Then, in 2003, the attraction made a leap across
entertainment media, from theme parks to movies, and became the
biggest live action hit of the year. We analyze and proceed with
our investments based on their estimated direct returns.
But this is show business, and it is often daunting to contemplate
the ultimate upside that could result from many of our investments.
All we know is that if we do our job well, growth will come from
both obvious and surprising places.
Of course, it was The Walt Disney Studios that had the bright
idea of transforming Pirates the attraction into Pirates
the movie. The studio had a lot of bright ideas in 2003, resulting
in the most successful year in live action film in its history,
both in terms of total box office and, more important, the profitability
of its live action slate. And, the quality of the studio’s
output was evidenced by Miramax’s Chicago winning the
Academy Award® for Best Picture. During the calendar year, The
Walt Disney Studios became the first in history to achieve more
than $3 billion in worldwide box office. This tremendous success
was the outgrowth of a conscious shift in strategy to rigorously
make the right movie for the right price. In 2003, the studio demonstrated
that it is possible in the moviemaking world to be fiscally prudent
and still pull in crowds. Best of all, many of our hit films during
the year form the basis for potential franchises, such as Bringing
Down the House and Pirates of the Caribbean: The Curse of
the Black Pearl, both of which already have sequels in development.
Another benefit of Pirates was its chicken-and-egg relationship
with the Disney brand. The film benefited from being released under
the Walt Disney Pictures banner, but Walt Disney Pictures also benefited
from this blockbuster, which broadened its audience and increased
its relevance. A striking example of the synergy between the movie
and the brand could be seen at the premiere, which was staged on
the banks of the Rivers of America at Disneyland, with entertainment
provided from the deck of the theme park’s pirate ship.
A big part of Walt Disney Pictures’ identity is based on
our animated releases, which, in 2003, proved to be as strong as
ever. Disney/Pixar’s Finding Nemo, released during
the summer, became the number one film of the year. For the holidays,
Brother Bear was another success, demonstrating once again
the enduring appeal of Disney animation. Earlier in the year, our
DisneyToon Studios released two highly successful films made for
modest budgets, The Jungle Book 2 and Piglet’s Big
Movie, franchise movies with a very low-risk, high-return investment
profile. Next year, we offer a similar mix of animated films, including
Home on the Range and the sixth movie from Pixar, The
Incredibles. Further down the road, in summer of 2005, will
be Disney’s 100 percent computer-generated animated film,
Chicken Little. No matter what the technology, Disney’s
animation legacy will continue to dazzle.
Another important development during the year was that DVD player
penetration reached more than 50 percent of homes in the United
States. This had enormous implications for our company. Consider
that, at the end of the year, The Lion King re-release sold
more than 13 million units, followed by Finding Nemo, which
is on a trajectory to set all-time records, with 20 million units
sold in just the first two weeks. In December, we released Pirates
of the Caribbean on DVD, which was another huge seller.
One of the advantages of The Walt Disney Studios relative to our
other businesses is that it is more insulated from general economic
conditions. The price of a movie ticket or DVD is low enough that
great films tend to do well in good times and bad. By comparison,
our parks are much more sensitive to general trends in the economy
and tourism. Not surprisingly, after a series of great years through
most of the ‘90s and into 2000, attendance at our parks has
dipped the past few years as the economy slowed and the number of
overseas tourists visiting America declined significantly. Toward
the end of fiscal 2003, as the economy showed signs of improvement,
we saw encouraging trends in attendance, trends that appear to be
continuing into the first weeks of the new fiscal year. If this
continues, then it will have important long-term consequences, since
a very high percentage of every incremental dollar generated at
our parks goes to the bottom line.
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