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EMBATTLED DISNEY FINDS CORE STRENGTH.

Byline: Dave McNary Staff Writer

The Walt Disney Co. is participating in a strange plot twist worthy of its own ``Sixth Sense.''

The entertainment giant has suffered through one of its worst years on Wall Street in 1999. Its ABC network remains in disarray, its president forced to leave earlier this year when she couldn't increase ratings fast enough. Its Disney Stores have gotten stale, and it's closing its Club Disney chain less than three years after its launch.

Things have gotten so frustrating at Disney that Chairman Michael Eisner earlier this year initiated a companywide, item-by-item review, looking for ways to cut costs and increase profits. Wall Street's reaction? Disney closed Friday at $24.0625, off 43 percent from its all time high in May 1998.

But the very cornerstone of Disney's business - supplying mass-appeal movies - is stronger than ever. And therein lies the stunning plot twist: While Wall Street remains fixated on Disney's other businesses, the one thing Disney has always done best - and done biggest - is stronger than ever.

In fact, by the time the last curtain drops at the nation's multiplexes on Dec. 31, Disney will have surpassed $1 billion in domestic grosses for 1999, the fifth time in six years it will have passed the 10-figure mark.

And if ``Toy Story 2'' and Robin Williams' comedy ``Bicentennial Man'' live up to advance buzz, Disney will break the single-year record of $1.26 billion set by Sony in 1997. To give some perspective, it's worth noting that Paramount is the only other studio to cross the $1 billion mark, and it needed ``Titanic'' to do so.

Two other studios may pass the $1 billion mark this year - Warner Bros. and Universal are each within $250 million with a half-dozen movies still to be released. But neither will challenge Disney for the box office crown this year.

``Disney tries very hard to maintain its reputation as the leader in family movies, and they've done a great job of keeping that edge,'' said analyst Dan Marx of ACNielsen EDI. ``They always have the big, family oriented movies every year. They are so far in front of everyone else that it's not even a race.''

But Disney's movie dominance hardly matters on Wall Street, where its ongoing success in the cutthroat world of Hollywood is simply a given and accepted as a matter of course. And Disney has become so big, with annual revenues of $25 billion, that even major hits like ``Tarzan'' and ``The Sixth Sense'' no longer move the stock.

``Part of Disney's problem in terms of the Street's perception is that they achieved such phenomenal success with `The Lion King' in 1994,'' said Steven Cesinger, an entertainment analyst with investment bank Greif & Co. ``They set the bar so high at that point that it becomes hard to achieve more than that.''

``The Lion King'' is not just the seventh-largest domestic grosser ever at $313 million; its popularity was such that it became a gold mine with massive profits from merchandise, home videos, TV and stage shows.

Although ``The Sixth Sense'' is also hugely profitable given its $40 million cost and $250 million in current gross domestic receipts, Disney shares ownership with Spyglass Entertainment, so ancillary revenues won't be anywhere near what a fully owned animated movie generates.

``Disney has had to focus more on its individual titles because they have not had blow-away results in animation,'' Cesinger said.

So Eisner, who came to Disney from Paramount in 1984, and studio chief Joe Roth, who headed 20th Century Fox in the late 1980s and early 1990s, have fine-tuned a strategy this year of focusing on the bottom line and Disney's strength as the leading brand in family entertainment.

High cost of talent

In a blunt message to shareholders in January, Eisner said Disney had ``succumbed to the overall industry trend of paying more and more for talent in front of and behind the camera. In many instances, profits did not materialize from the revenues achieved by our films.''

Eisner said at that point that Disney would shift more toward Disney-labeled family films. The studio set a target of slashing its annual live-action costs from $1.5 billion to $1 billion through a series of moves, including seeking co-financing on many projects and letting many of its production deals lapse.

The strategy also maintained the total number of annual releases to about 20, or about half its total of just a few years ago, and continued its hands-off policy toward Miramax Films, the highly successful independent project specialist operated by Bob and Harvey Weinstein.

``What Disney has been able to do is eliminate mid-range, mediocre films with stars who are either on their way up or down,'' noted Drew Devlin, an executive with Clark Film Buying in Bozeman, Mont. ``They will still go for the blockbuster like `Armageddon,' but they are shrewd enough to pick up on `The Sixth Sense.' And they don't vary too far from their proven strengths like animated films and live-action films like `Inspector Gadget.' ''

Good decisions

Part of the secret, according to Disney distribution chief Chuck Viane, is Roth's ability to make exceptional choices.

``There's a real focus on the general audience,'' Viane said. ``Joe Roth's guideline is very simple in that he's always felt the play is the thing. So he looks for concepts that have an absolute chance to succeed with all audiences.''

Disney's prospects for the last part of the millennium are excellent. Its coming slate looks quite strong - no surprise since Disney usually weights its schedule toward the holiday periods when family oriented fare will reach the widest possible audience.

``I think that it's almost a given that Disney will go past the (Sony) record,'' said Robert Bucksbaum, president of the Reel Source forecasting service. Disney's cumulative grosses through today should be around $940 million so here's how the rest of the year stacks up:

``The Sixth Sense,'' which should hit the $250 million mark today, could take in another $40 million and replace ``Home Alone'' as the 11th-highest domestic grosser of all time before finally leaving theaters. Some of that would come next year if star Haley Joel Osment receives an Academy Award nomination.

``The Insider,'' a look at Jeffrey Wigand's battle against the tobacco industry that's due Nov. 5, could take in $30 million to $60 million. It carries some early positive buzz.

A pair of December releases - teen-oriented comedy ``Deuce Bigalow Male Gigolo,'' with Rob Schneider, and 1930s drama ``The Cradle Will Rock'' - should bring in another $30 million to $60 million.

``Toy Story 2,'' due out Nov. 24, should take in around $150 million, nearly all of that by the end of the year.

``Bicentennial Man,'' set for Dec. 17, should also take in $150 million with half of that by the end of the year.

If all those ``ifs'' come true - and none are particularly far-fetched predictions - Burbank-based Disney's final domestic tally will be slightly above the $1.26 billion record. That would represent a 14 percent increase over Disney's $1.1 billion total in 1998 at a time when the overall box office gain is expected to be about half that.

Family audience

What's perhaps most impressive about Disney's achievement is that it's largely been accomplished by getting the elusive family audience to go see its movies. After ``The Sixth Sense,'' the studio's top four performers will likely be from that category - ``Tarzan,'' ``Inspector Gadget,'' ``Toy Story 2'' and ``Bicentennial Man.''

``There's no question that the Disney label has brand recognition,'' Bucksbaum said. ``They own most of the top animated movies of all time, so they'll have that brand loyalty until someone else comes along with string of hits.''

Devlin suggested that Disney's brand power is so strong that the studio would have been able to achieve much better results than the disappointing $22 million domestic gross for Warner Bros.' ``The Iron Giant.''

``They are the only company that can really sell family films consistently,'' he added. ``I think they would have done well with `Iron Giant.' ''

When the year is over, ``Toy Story 2'' might replace ``Tarzan'' as the studio's top family performer this year. That would be quite an accomplishment since ``Tarzan'' grosses recently topped $170 million and it's still playing in 300 theaters more than four months after its release.

``I think `Toy Story 2' is going to be huge,'' Devlin said. ``It's a great premise, and the `want to see' is going to be there. It's going to be one of few sequels as big as the first.''

HOW DISNEY DID IT

Walt Disney's domestic film business will cross the $1 billion mark in a few weeks for the fifth time since 1994. Here are the contributors:

1999 domestic Weeks in

Rank Title gross x release

1. ``The Sixth Sense'' $242.7 million 10 weeks

2. ``Tarzan'' $170.1 million 17 weeks

3. ``Inspector Gadget'' $94.9 million 12 weeks

4. ``A Civil Action'' xx $56.6 million 19 weeks

5. ``A Bug's Life'' xx $48.3 million 26 weeks

6. ``Mighty Joe Young'' xx $40 million 16 weeks

7. ``Ten Things I Hate About You'' $38.2 million 22 weeks

8. ``My Favorite Martian'' $36.8 million 23 weeks

9. ``Instinct'' $34.1 million 13 weeks

10. ``The 13th Warrior'' $31.9 million 7 weeks

11. ``The Other Sister'' $27.8 million 17 weeks

12. ``Enemy of the State'' xx $24.1 million 22 weeks

13. ``Doug's First Movie'' $19.4 million 18 weeks

14. ``Summer of Sam'' $19.3 million 11 weeks

15. ``Rushmore'' $17.1 million 19 weeks

16. ``The Waterboy'' xx $15.9 million 24 weeks

17. ``Mystery, Alaska'' $5.9 million 2 weeks

18. ``Mumford'' $4 million 3 weeks

19. ``I'll Be Home For Christmas'' xx $402,271 10 weeks

20. ``Endurance'' $229,128 12 weeks

21. ``Breakfast of Champions'' $108,024 4 weeks

22. ``Beloved'' xx $96,526 22 weeks

Total - $927.8 million

x As of Oct. 11

xx Film released in 1998 but grosses listed are only for 1999

SOURCE: Showbibizdata.com.

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Publication:Daily News (Los Angeles, CA)
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Date:Oct 18, 1999
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