Edgar Rice Burroughs has been kind to Disney (NYSE:DIS). The animated version of Burroughs’ Tarzan was a smash hit for the company back in 1999. It was Disney’s most expensive animated feature yet, costing $130 million to make but grossing a solid $448 million at the box office around the world. So you can see why the company thought John Carter was a good idea from the start.
A sci-fi epic with Burroughs pedigree, it was directed by Andrew Stanton, the man behind Pixar’s Finding Nemo and WALL-E, movies that grossed nearly $1.4 billion in ticket sales between them. It was a guaranteed winner to start off 2012. At least that was the thinking. As of now, Disney’s going to take a hit on John Carter.
The company announced on Monday that it expects to report a loss of $200 million on the movie at the end of this quarter. Carter’s estimated production budget was around $250 million, and that’s in addition to the roughly $100 million Disney spent marketing the film. Since opening at the beginning of the month, the movie has brought in just $184 million in ticket sales, but since ticket sales are split almost evenly with theater owners, that means Disney has yet another flop on its hands.
The Pixar factor
Carter is just the most recent in a string of disappointments for Disney’s film segment. March 2011 saw the company take a monstrous hit on the animated sci-fi feature Mars Needs Moms, a $150 million movie that made less than $40 million at the box office. Major sequels like Pirates of the Caribbean: On Stranger Tides and Cars 2, while grossing around $1.6 billion between them last summer, both disappointed compared to previous films in those respective franchises.
2012 isn’t over for Disney by any means. The company has two major tent-pole features lined up for the summer. After two summers of sequels, Pixar has made an original property for Disney, Brave, which will release in June. The studio’s last original feature, 2009’s Up, grossed $731 million at the box office.
The company also has comic book movie The Avengers lined up for May, a production that pulls together the Iron Man, Captatin America, Thor, and Hulk film franchises, which have collectively earned around $2.1 billion in box office since 2008, under one roof. These are also monumentally expensive films to make, though, and Disney can’t afford to keep spending hundreds of millions trying to create the next big franchise when ticket sales are so low across the board.
Partial salvation from 3D
Luckily for Disney and its investors the company seems to have stumbled on a winning formula for turning around quick, easy revenue. What started with the 3D re-release of The Lion King in September 2011 is turning into a strong strategy for Disney. That re-release made $8.8 million in its first night in theaters alone last fall and the 3D conversion cost less than $8 million to complete. Disney also spent little on marketing ahead of its release.
It replicated that success in January with the 3D release of 1991’s Beauty and the Beast. It cost less than $10 million to convert and made $18.5 million in its opening weekend. Disney already has plans to re-release Finding Nemo, Monsters Inc., and The Little Mermaid in 3D over the next 12 months, meaning that the company has an affordable way to at least trim the losses on poorly performing major releases.
Long term, however, Disney needs to re-evaluate its movie business. It hasn’t been able to create a new big-budget earner, like the Pirates movies from the last decade, and the market for low-cost, high-earning tween fare like High School Musical has dried up. Time for a new plan before it runs out of classics to re-release in 3D.