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April 22, 2008

Disney Adds A Shingle

Disney announced a new production studio, Disneynature. The studio will produce major motion picture documentaries "about the world in which we live." The first film, titled "Earth," will be released on Earth Day 2009. The film is being produced by the BBC and members of same team that created the Planet Earth series.

The press release mentions that Disneynature will embrace other Disney businesses including publishing, licensing, parks, and educational outreach. While the emphasis is clearly major motion pictures, given the strength of the Disney brand, it does nto seem like a stretch to suggest that Disneynature is the company's initial foray into non-fiction film and TV production. It does not take much imagination to envision a Disneynature TV channel.

If my speculation is correct, it is a small negative for the current, dominant industry leader in non-fiction TV, Discovery Communications (DISCA). The mere mention of Planet Earth in Disney's press release is a reminder that Discovery would be impacted by a broad Disney effort in non-fiction. Planet Earth is one of the most highly rated programs ever to run on the Discovery Channel and was at least partially responsible for the big ratings turnaround at the network last year which helped to trigger accelerating financial results and a sharp upward move in DISCA shares.

Disney is just getting started in non-fiction and has no plans beyond releasing seven films, including Earth, between December 2008 and 2012. The impact on DISCA is likely to be minor for the time being but it is something to think about. I remain optimistic about DISCA shares on the back of expanding margins, above average top line growth opportunities, and the pending restructuring into an operating company. The shares have been on my wish list for several months and may show up in Northlake client accounts soon.

Posted by Steve Birenberg at April 22, 2008 10:04 AM in DIS