At 28 million units and counting, "The Incredibles" is the best-selling DVD of the year, but that hasn't deterred federal regulators from looking into disappointing sales of the hit movie.
LOS ANGELES (The Hollywood Reporter) -- At 28 million units and counting, "The Incredibles" is the best-selling DVD of the year, but that hasn't deterred federal regulators from looking into disappointing sales of the hit movie.
Pixar Animation Studios said Aug. 26 that the Securities and Exchange Commission has launched an informal inquiry into DVD sales of "Incredibles" similar to its probe into DreamWorks Animation SKG surrounding the "Shrek 2" DVD.
News of the investigation, first revealed Aug. 26 in the Wall Street Journal, sent Pixar shares down 2.4% to $41.99. Pixar shares traded north of $50 per share before its profit warning June 30, when management first said it was selling fewer "Incredibles" DVDs than it expected.
A Pixar spokesman said the company has provided information to the SEC but would not discuss details. Calls placed to the Walt Disney Co., Pixar's partner on "Incredibles," were not returned Aug. 26.
Disney and other companies have told investors that DVD sales of certain titles are coming up shy in part because of the speed at which retailers move slower-selling titles off the shelves. But because Pixar and DWA are dependent on a few hit movies to drive profits, stock of the two companies can fluctuate wildly when sales fall short of expectations, resulting in angry shareholders and sometimes attention from the SEC.
The inquiries into Pixar and DWA, sources familiar with the matter said, focus on sales guidance provided by the companies and on whether they informed investors quickly enough when retailers began returning large numbers of the unsold DVDs.
In the case of "Shrek 2," DWA predicted it would sell 40 million units by the end of the first quarter, though during its earnings report in May, the company acknowledged it had sold just 35 million. DWA the same day predicted it would reach its previous goal of 40 million units by year's end; shares that had only recently gone public dropped 12% the next day.
"Pixar received an informal request for information from the SEC, as companies do from time to time," Pixar spokesman Nils Erdmann said Aug. 26, "and we believe we fully complied with that request."