Is an incremental $300mm in revenue and under $200mm in net income a year worth $7.4bn, and is this performance even sustainable? That’s the question many analysts are asking about Disney and Pixar after Ratatouille raked in (a mere?) $47mm on opening weekend.
The movie debuted #1 in domestic box office and faced competition from Bruce Willis’ titanium-enhanced musculoskeletal system (if you catch Live Free or Die Hard you’ll know what I’m talking about) and Steve Carell’s giant career mistake, but still turned out to be Pixar’s worst opening weekend in 9 years. Also, at a projected domestic gross of under $200mm, Ratatouille will be the 3rd straight Pixar movie to fall short of its predecessor.
Analysts like Merrill’s Jessica Rief Cohen were bullish on Disney’s post-Pixar prospects at the time of the acquisition in January 2006, even though many thought the move wouldn’t be accretive until 2008. In retrospect, almost everyone agrees that the Pixar deal was pricey, and that Jobs cashed out at Pixar’s peak valuation, but there are lingering disagreements as to whether Pixar amounts to a net positive as a Disney brand.
Seeking Alpha concedes that the Pixar deal was expensive, but that the unit focuses the mouse’s media division more on content and less on distribution. The argument here is that it’s much tougher for a giant like Disney to remain on the forefront of ever changing distribution methods, but valuable content is indispensable regardless of how it’s delivered to the masses. The intellectual property/content business also takes maximum advantage of Disney’s scale.
Personally, we think that if movies like Ratatouille save us from Shrek 4: Attack of the Surfing Penguins, or at least inspire other studios to match Pixar’s quality, Disney did the right thing by not upsetting its winning combination with Pixar. Disney also gets to reaffirm its status as the industry benchmark for animation, and a content provider's image is a huge asset, however intangible.
On Disney's Pixar Acquisition: Pricey, But Worth It [Seeking Alpha]
Disney's (DIS) Pixar Purchase: Never Give A Sucker An Even Break [24/7 Wall St]
Posted by CAV, Jul 02, 2007 1:34PM
I CONCUR 100% ... though hardly anyone will admit to having seen the very cute Ratatouille, I happily took my boys to see it, and it was very good .. and believe me, most parents would rather spend money and time watching even the worst Pixar movie -- Cars, which I didn't like mostly b/c I'm just not that into NASCAR -- rather than the rest of the schlock offered by virtually every other studio ..
John Lasseter (Toy Story, now head of Disney Animation), Andrew Stanton (Finding Nemo) and the extremely talented Brad Bird (Incredibles, Ratatouille and a GREAT film if you have boys, Iron Giant) will be able to foster a much more creative atmosphere for DIS animation than anyone since Jeffrey Katzenberg.
and by the by, Steve hasn't sold a share since the deal, and still holds nearly 7% of the company (138MM shs) -- he def has a vested interest in Pixar's continued success (and that of DIS overall) ... it's no coincidence that Pixar's movies hold prominent position on Apple's movie trailers site (!)
http://www.apple.com/trailers/#section=exclusive