Risk & Compliance

DVD Disclosures Eyed by SEC

An inquiry into Pixar's release of ''The Incredibles'' was reportedly prompted by DreamWorks' difficulties with ''Shrek 2.'' Plus: Do movie screeni...
Craig SchneiderAugust 26, 2005

The Securities and Exchange Commission has launched an informal inquiry into Pixar Animation Studios regarding the DVD release of its movie “The Incredibles,” according to The Wall Street Journal.

Pixar announced on June 30 that it would miss its second-quarter earnings forecast because retailers returned more copies of the “Incredibles” DVD to the studio than it had expected, the Journal reported. DVD and videotape sales for the movie fell about 7 percent short of estimates, the studio reportedly added.

Sources also told the Journal that Pixar is being investigated because its problems mirror those of DreamWorks Animation SKG, which twice cut its earnings forecasts after heavy returns of its “Shrek 2” DVD. In January, DreamWorks announced that it sold more than 37 million copies of “Shrek 2” worldwide, but it later reduced that figure to 33.7 million.

The SEC is reportedly looking into whether DreamWorks — recognizing that DVDs appear to have an increasingly short shelf life — should have informed investors earlier of its “Shrek 2” problems. DreamWorks reportedly informed investors of the SEC informal inquiry in July, saying only that the probe concerns “trading in its securities and the disclosure of its financial results on May 10, 2005.”

Regulation Fair Disclosure has also raised its head, the Journal also noted. Sources told the newspaper that the SEC is examining long-standing industry practices such as screening movies in advance of their release to the general public — and whether these screenings constitute a disclosure of material information to a group of select people, and therefore a violation of Reg FD.

4 Powerful Communication Strategies for Your Next Board Meeting