• Los Angeles Times, Wednesday, February 4, 2009 10:45 AM

All of Walt Disney Co.'s major divisions -- the movie studio, the television group, parks and resorts, and consumer products -- experienced drops in operating income for the company's fiscal first quarter ended Dec. 27, compared with the same period last year, and the company badly missed analyst's projections, Dawn C. Chmielewski reports.

While acknowledging the impact of the recession, CEO Bob Iger also says that Disney is grappling with fundamental changes in how people seek to be entertained -- changes that are undermining the company's television business and eroding DVD sales. Consumers bought fewer new releases on DVD and there was less demand for Disney's classic titles. Studios currently depend on home video sales for as much as 70% of a film's profit.

Anthony J. DiClemente, an analyst with Barclays Capital, says this is the first time a studio executive has publicly acknowledged that falling DVD sales might have something to do with changes in how people watch films. Iger says Disney will respond by reducing marketing and distribution expenses for DVDs and taking other steps to enhance the perceived value of its home entertainment products.

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