Financial Analyst Speculates The Walt Disney Company Has Lost Nearly $900 Million At The Box Office In The Past Year
Financial and box office analyst Valliant Renegade recently shared his speculation and calculations that The Walt Disney Company has lost nearly $900 million at the box office in the past year.
In a recent video upload, Valliant Renegade looked at eight of the most recent releases coming from studios owned by The Walt Disney including: Lightyear, Thor: Love and Thunder, Strange World, Black Panther: Wakanda Forever, Ant-Man and the Wasp: Quantumania, Guardians of the Galaxy Vol. 3, The Little Mermaid, and Elemental.
He shared the estimated production budgets for these films as reported by box office tracking websites such as The-Numbers as well as estimated marketing costs from outlets such as Deadline to provide estimated total costs for each films as well as a sum total cost for all the films combined. That sum total came to $2.75 billion.
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From there, Valliant Renegade explains how box office grosses return to The Walt Disney Company. He shares that typically 55% of domestic grosses, 43% of international grosses, and 25% of the Chinese box office come back to the studio.
Next, the analyst shared his estimates for how much money each film returned to The Walt Disney Company and a sum total of returns. That sum total clocked in at $1.86 billion.
Valliant Renegade then subtracted $2.75 billion cost from the $1.86 billion in returns, which comes to nearly $900 million at $890 million.
However, he notes this is just the loss at the box office for the past year and does not factor in the economic opportunity costs that The Walt Disney Company has brought upon itself by launching its Disney+ streaming service and refusing to license its films to other streaming services and companies such as Netflix, Warner Bros. Discovery, Prime Video, Paramount, or Comcast.
Valliant Renegade explains, “One of the things that we always talk about here, that is the perfect time to remind everybody, is that Disney consumes all of its own content post-theatrical. Meaning that Disney that used to license their big content out like the entire MCU to places like Netflix for years, those were billions of dollars worth of third-party contracts that have now been taken off the table.”
He continues, “So not only do we need to consider how much money Disney has lost at the box office, we also need to consider how much money Disney has lost in economic opportunity costs. You see, that’s how much money they could have made had they actually taken these films and licensed them to Netflix, or Amazon Prime, or even similar to what Universal does with a split pay one window.”
“If Disney had just taken the Universal-type deal with those two major streamers Disney would have a lot more money in its pocket, but they’ve chosen to keep it all home to support Disney+,” Valliant Renegade details.
Valliant Renegade then provides a hypothetical that each of the films could have received a $125 million of pay one window value if they had been licensed to another streaming platform. Multiply that by eight and the economic opportunity loss is $1 billion.
He notes that while the company has been able to support these losses in the short term with revenues from their theme parks and linear TV mainly due to live sports, it won’t last forever.
“That can’t go on forever. It’s just simple numbers, folks,” Valliant Renegade asserts. “That’s where we are. The Walt Disney Company is just making all the wrong decisions not only creatively, but in the distribution channels as well.”
The company’s CEO Bob Iger recognized the ballooning costs and the diminished returns at the box office during the company’s Q1 FY23 Earnings Results webcast.
He said, “In additionally we are going to lean more into our franchises, our core franchises, and our brands. I talked about curation in general entertainment. We have to be better at curating the Disney, and the Pixar, and the Marvel, and the Star Wars of it all.”
“And, of course, reduce costs on everything that we make,” he shared. “While we are extremely what’s proud on the screen, it’s gotten to a point where it’s extraordinarily expensive. We want all the quality. We want the quality on the screen, but we have to look at what they cost us.”
Not only is the company losing out big at the box office, but they’ve racked up massive costs at Disney+. Iger noted he’s attempting to massively cut those costs and that many of the programs they funded were not actually driving anyone to subscribe to the streaming service.
During the company’s Q2 FY23 Earnings Results webcast he stated, “As we grow the business in terms of the global footprint, we realized that we made a lot of content that is not necessarily driving sub growth and we’re getting much more surgical about what it is we make.”
“So as we look to reduce content spend, we’re looking to reduce it in a way that should not have any impact at all on subs,” he asserted. “We believe there is an opportunity for us to focus more on real sub drivers.”
He continued, “And one interesting example — I should throw marketing in too — where when you make a lot of content everything needs to be marketed. You’re spending a lot of money marketing things that are not going to have an impact on the bottom except negatively due to the marketing costs.”
“One thing we also know is that our films, those that are released theatrically, big tentpole movies, in particular, are great sub drivers, but we were spreading our marketing costs so thin that we were not allocating enough money to even market them when they came on the service,” Iger said.
He then relayed, “As witnessed by the ones that are coming up including Avatar, Little Mermaid, Guardians of the Galaxy, Indiana Jones, Elemental, etc…, where we actually believe we have an opportunity to lean into those more, put the right marketing dollars against it, allocate more away from programming that was not driving any subs at all.”
“I guess this is part of the maturation process as we grow into a business that we had never been in. We are learning a lot more about it. Specifically, we are learning a lot more about how our content behaves on the service, and what it is consumers want,” Iger concluded.
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In fact, the company’s former Chief Financial Officer Christine McCarthy also revealed during that same call, “We are in the process of reviewing the content on our DTC services to align with the strategic changes in our approach to content curation that you’ve heard Bob discuss. As a result we will be removing certain content from our streaming platform and currently expect to take an impairment charge of approximately $1.5 to $1.8 billion. The charge, which will not be recorded in our segment results, will primarily be recognized in the third quarter as we complete our review and remove the content. And going forward we intend to produce lower volumes of content in alignment with this strategic shift.”
What do you make of these estimations for how much The Walt Disney Company has lost at the box office and how much they are losing out on when it comes to licensing their films to streaming services such as Netflix and Prime Video?
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