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The Walt Disney Company (DIS) & Viacom, Inc. (VIAB): How Summer Film Releases May Affect Profits

The Walt Disney Company (NYSE:DIS) and Viacom, Inc. (NASDAQ:VIAB) are major entertainment conglomerates. The companies are the producers of two of the highest-grossing films of the year so far, both of which were released in March. Specifically, the films are Disney’s Wizard of Oz prequel and Viacom’s G.I. Joe: Retaliation, which have earned $234 million and $122 million, respectively, as of this writing.

The Walt Disney Company (NYSE:DIS)

The two have also released May movies to wide box office appeal. Disney/Marvel’s Iron Man 3 and Viacom, Inc. (NASDAQ:VIAB)/Paramount’s Star Trek: Into Darkness may help to bolster the bottom lines of their studios’ holding companies.

Disney’s franchises tend to fare well

The Walt Disney Company (NYSE:DIS) has benefited from its previous two “Iron Man” pictures, having purchased access to numerous Marvel characters with its buyout of that firm last decade. With the latest film in the franchise, the company has attained the top spot in terms of revenue production thus far in 2013.

Most readers are likely aware of the company’s other blockbuster that included numerous sequels, Pirates of the Caribbean. The most recent film in the “Pirates” franchise netted more than $241 million at the box office in 2011.

Along with moviegoer revenues, The Walt Disney Company (NYSE:DIS) benefits from these films through DVD and Blu-ray sales as well as through the offering of consumer merchandise. Home video sales are historically a major revenue generator in the December quarter. Looking forward, the company may profit from its presence in the video-on-demand market and other online channels as well.

The company’s partial ownership of the Hulu service also falls into that category. Hulu is mostly a provider of television programming to online audiences, providing access to shows including some from Disney’s ABC network.

Viacom bettering 2012’s studio returns

Viacom, Inc. (NASDAQ:VIAB)’s Paramount is likely to enjoy an earnings upside from its 2013 films as receipts have been strong when compared with last year. Sequels produced by the company are also big revenue contributors, helping it to mitigate the effects of possible top-line declines in other business units.

The company’s cable networks are its core unit and where management has been targeting its investments of late. Properties such as MTV and Comedy Central are poised to gain in viewership as a result of improved programming. For more on that topic, view my previous blog on Viacom, Viacom’s Next Growth Drivers?.

Viacom, Inc. (NASDAQ:VIAB) also has plans to launch an animated film business that could assist it over time in its focus on the youth consumer. Time Warner Inc. (NYSE:TWX) and Disney have benefited in the past from films that appeal to young theatergoers, seemingly the most surefire productions to earn substantial profits. Many of the top-grossing films have been targeted at young demographics, spurring Viacom to launch its new business with a SpongeBob SquarePants film.

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