Report: Disney May Slash Movie Production

Walt Disney Co.'s (DIS) film studio plans to cut annual movie production by more than half and eliminate jobs to trim costs and improve shareholder returns, according to a report in show business newspaper Daily Variety.

The move comes despite a record weekend box office run of $132 million for Disney's "Pirates of the Caribbean: Dead Man's Chest." Wall Street analysts this week had begun to review financial estimates for company earnings due to the blockbuster ticket sales.

In an unsourced report, Variety said Tuesday that Disney will announce measures in the coming days to slash the number of films it makes to about eight per year from around 18.

Variety said all movies would be branded under the Disney logo, posing a threat to the stature of smaller film companies. The studio also plans to "substantially" cut its work force as part of an overhaul planned by Walt Disney Studios Chairman Dick Cook, the report said.

Cook could not immediately be reached for comment.

Cook has been working for several months on a plan to resurrect the studio division, whose year-over-year revenue comparisons have been down for the last four quarters. Variety said the new overhaul would involve deeper cuts than previously anticipated.

Sanders Morris Harris analyst David Miller said Disney could stand to cut expenses, despite the ticket sales seen from "Pirates" or the animated feature, "Cars."

"The internal rate of return (for the studio division) is not shareholder friendly," Miller said. "Obviously, even though 'Cars' or 'Pirates' were big successes, the internal rate of return was insufficient."

But whittling down its movie slate does not necessarily mean the company will change its overall spending on filmed entertainment, he said.

"It really comes down to how do you want to allocate your capital," Miller said. "Do you want to allocate that over 18 films, in which the films cost less, or 8 films that cost more? It could be that Disney sees a higher rate of return from tent pole films than from smaller films."

Walt Disney Co. shares were down 23 cents at $30.02 on the New York Stock Exchange in late morning trading.