Disney sells 1.5 million movies via iTunes, sees early revenue of $25 million a year

A quick look through the Disney earnings call transcript on SeekingAlpha turned up a couple interesting bits about the success of movie downloads through Apple's iTunes store. Here are two of them; both are from Chief Financial Officer Tom Staggs

Our Studio performance also indicates that the distribution of our films on new digital platforms is not cannibalizing traditional platforms. To date, over 1.5 million of our movies have been downloaded through iTunes, and we think this broader distribution of our product is a catalyst for broader consumption of our product.

As a comparison, Steve Jobs noted that 1.3 million movies had been sold via the iTunes store at the beginning of January. But there was a little more detail provided later in the transcript:

We're, right now, pacing that our downloads, for example, from the Studio and iTunes, it's at a pace to do a little better than about $25 million of downloads for the year. It's nice because it looks like that's a purely incremental audience by all accounts. Certainly our DVD sales in the first quarter would point to that being worst-case and not cannibalistic. Best case, audience expanding. And I think it's probably the latter that's true.

This is a little hard to figure out, but it suggests that Disney is not seeing any downside to its DVD sales as the result of doing digital downloads. That got reinforced a bit later in the following exchange:

Unidentified audience member
...In light of Wal-Mart and Target's pretty public protests about you putting movies on iTunes, I was wondering if you saw less of a mix of DVD's sold through those channels this quarter and/or do you expect to see a change if subsequent quarters? Thanks.

Tom Staggs
I think that it's safe to assume that given the strong results we saw in DVD, we were selling through strong numbers through all of our major retail partners. And we're pleased and hopefully, they're pleased.

And we also feel they must see the same evidence we do of the lack of cannibalization. Yesterday we announced that we will participate in Wal-Mart's DVD -- their sort of movie download program.

And so we'll be there on Wal-Mart for downloads. So I'd say that we're pleased with where that relationship is and I think it's a great distribution partner to have. And with obviously the strong content that we've had, I think we made a difference in their quarters as well.

So what does it all mean? By making its movies available via iTunes, Disney stands will collect an additional $25 million in revenue just this year (side note: Bob Iger estimated that the number may be closer to $50 million at a Goldman Sachs conference). They can claim it is in addition, because they haven't seen any significant effect on DVD sales. And they don't see any threat to this revenue stream from Wal-Mart and its download service; in fact, Tom specifically calls it their "sort of movie download program".

The outstanding question: how long will other studios sit on the sidelines and let Disney collect tens of millions of dollars in digital movie revenue from iTunes that they don't get? Our bet: not long.

Full disclosure: the author is long Apple, the owner of the iTunes store, as of this writing.

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