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COMPANY TOWN | THE BIZ / CLAUDIA ELLER

King Disney

When It Comes to Making Money on Films, Studio Reigns

June 10, 1997|CLAUDIA ELLER

Walt Disney Co. is doing something really, really weird--in fact, almost unheard of in this day and age: It's making money in the movie business. And lots of it.

Defying the odds, the Burbank-based studio is actually seeing double-digit returns on its investment in movies, which, including production, marketing and overhead, amounts to about $1.5 billion a year.

According to Mike Yocco, entertainment analyst for Paul Kagan Associates, Disney is "one of the only studios" that can make that claim. Certainly, with the success of "Liar Liar" and "The Lost World: Jurassic Park," Universal is doing so in the first half of this year. Sony, with "The Fifth Element," "Jerry Maguire," "Anaconda" and such hit-hopefuls as "Men in Black," is also raking in the bucks for the moment.

But with production and marketing costs so high and the marketplace flooded with product, the chances of making profitable movies today are typically slim to nil. Ask anyone in the business, and he or she will tell you that most films lose money.

Yet for the last three years Disney has spent more on movie making and marketing than during any time in its history. And it's also sold more tickets to its movies worldwide than any other distributor.

Disney Studios Chairman Joe Roth, who since taking over the reins in 1994 has transformed the once-notoriously cheap movie-making factory into a competitive supplier of highly exploitable live-action features, sees the studio's current mission as "keeping up its worldwide market-share leadership and continuing to increase profitability by driving the same kind of revenues with far fewer titles."

Disney has been steadily shaving the number of films it makes, from 40 a year to about 20. The company recently assembled a 1998 slate of 19 films, on which it will spend an estimated $750 million in production costs and an additional $400 million on marketing.

While Yocco believes that Disney will continue to be profitable in the foreseeable future, he also thinks the studio's decreased output "will cut down on the number of opportunities to get blockbusters."

Roth disagrees: "That's completely inverted logic. Anyone who does their job reasonably well will be able to identify high-revenue pictures when going through their 200 or so projects in development, whether they're making 15 movies a year or 40."

While Roth declined to divulge specifics, he said he expects fiscal 1997 (which began Oct. 1) to be "our most profitable year" ever in the live-action genre, thanks to such hits as "Ransom" and "101 Dalmatians." Yocco estimates Disney already has seen more than $100 million in profit on "Ransom," which grossed $300 million worldwide, and projects that "Dalmatians," which grossed more than $300 million globally from theaters, will reap the studio more than $300 million in total earnings from all revenue streams, including consumer products.

The most surprising number, though, is Disney's success rate for its films since October. During that period, according to industry sources, Disney has lost money on only one movie out of 16 releases--a whopping $30 million on "The Preacher's Wife," which cost $65 million to make--and is sure to lose some on its current box-office dud "Gone Fishin'," which cost around $30 million and has grossed just $10.5 million in two weeks.

This weekend, Disney had the No. 1 box-office draw in the country with "Con Air," an $80-million action movie starring Nicolas Cage and produced by Jerry Bruckheimer (the team behind Disney's hit film "The Rock") that debuted with $24 million.

The film, released simultaneously in Britain, Hong Kong, Latin America and Israel, grossed an additional $5 million overseas, only $500,000 less than what "The Rock" opened with last year in those same regions. Based on its initial release, Disney is projecting that "Con Air" will gross more than $100 million domestically and $175 million internationally.

Roth says he is "nervous" about how the film will fare in coming weeks against the back-to-back releases of other big summer entries like "Speed 2: Cruise Control," "Batman & Robin," "Face/Off," "Men in Black," "Contact" and "Air Force One."

"No matter how well it plays, we're going to have competition one weekend after another," Roth says.

Disney's other potentially lucrative properties this year include the animated feature "Hercules" (June 27), "George of the Jungle" (July 16), the re-release of "The Little Mermaid" (Nov. 14) and "Flubber," starring Robin Williams (Nov. 26).

The number of expensive, star-driven movies on its next year's slate, put together by Roth and his two movie division heads, Touchstone Pictures' Donald De Line and Disney Pictures' David Vogel, underscores Disney's about-face strategy and spending habits under Roth.

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