Can Disney pull off another Pixar and continue its amazing performance?
Since Disney bought Pixar back on May 5, 2006, its stock has gone up by 100% while the S&P 500 has gone up by 22%. Disney spent $7.4 billion to buy out Pixar, offering 2.3 Disney shares for each Pixar share. This is what led the late Steve Jobs to become Disney's largest shareholder, as he owned 50.1% of Pixar.
Pixar went on to be a big success, as each of their movies have averaged about $600 million in worldwide sales. Pixar is about to release the next movie in the Finding Nemo series, which grossed $880.2 million worldwide (box office data, look at the bottom chart) in 2015. Now Pixar is trying to hit gold again with Lucasfilm, the company which was owned 100% by George Lucas and pioneered the Star Wars franchise.
Lucasfilm is well known, as it owns the Star Wars franchise. Disney paid $4.1 billion for Lucasfilm, half in cash and half in stock (40 million shares). Now some may wonder if Disney will be able to recoup all that money back, considering Star Wars has already released six movies. But if you look at the data, this could be even bigger than Pixar. The six Star Wars movies have made an average of $736.25 million per movie (which excludes the animated Star Wars movie released in 2008), with an average production budget of $68.6 million per movie. That means Star Wars was making over $650 million (not including marketing costs) per movie, which is huge--even more than what Pixar was bringing in.
I'm expecting demand for Star Wars Episode 7 will be massive, as a movie hasn't been released since May 2005 (not including the silly animated movie) and because J.J. Abrams is making it. Keep in mind that J.J. Abrams directed Star Trek and is quite popular among sci-fi fans.
Potential for Star Wars
Disney recently ended LucasArts, closing the video game branch of their acquisition. They also stopped the animated series from making any more episodes. They want to make Star Wars a licensing model, where they don't have to commit any capital to keep making money. While these actions angered some, it was done to keep costs down and to possibly build up more excitement for the next movie. Going forward Disney hopes to churn out a new Star Wars movie every two to three years.
In the long run, this could pay off in a huge way; if you look at how many Star Wars books there are out there, Disney could keep making movies for decades. The franchise so far has stood the test of time, and will continue to have a very loyal fan base as parents pass on their love for Star Wars to their kids, and those kids go on to watch the next set of movies.
Other Movie Makers
Dreamworks Animation and Lions Gate Entertainment are good examples of how companies can use their existing fan base to increase profits and revenue. Dreamworks' Kung Fu Panda 2 made $665.6 million with a production budget of $150 million. Why was Kung Fu Panda 2 so successful? Because Kung Fu Panda already had a strong fan base. The first Kung Fu Panda brought in $631.7 million (with a production budget of $130 million), and those same consumers went on to see the next in the series.
Lions Gate bought up Summit Entertainment in January 2012, and Summit owned the rights to the Twilight series. As many of you know, Twilight has a huge cult following. The first Twilight made $398 million at the box office worldwide. By the second to last Twilight, it was bringing in $710 million worldwide. Lions Gate was smart to purchase up Summit just before the last Twilight was released, Twilight Breaking Dawn Part 2. That movie went on to bring in $832.7 million worldwide at the box office. My point is that if you already have a large following, like Star Wars, Kung Fu Panda, or Twilight, then it becomes very easy to see large sales when the next movie comes out.
I think that Disney, with all of its creative talent, will be very successful with its acquisition of Lucasfilm and the Star Wars property. With such a large fan base, it seems hard that with J.J. Abrams at the helm it won't bring in hefty sales at the box office. Bullish on the next Star Wars and Disney.
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