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October 09, 2007

Pirates, Cars, and Rats

While preparing my fourth quarter box office preview column last week, I came across some interesting and positive data concerning Disney. One of the worries for Disney this year has been the tough comparison at the movie studio due to the phenomenal success last year of Pirates of the Caribbean: Dead man’s Chest and Cars. This year, Disney released Pirates of the Caribbean: At World’s End and Ratatouille. Domestically, both of the 2007 releases significantly trailed their 2007 counterparts. Pirates 2007 matched Pirates 2006 overseas, leaving it $100 million short. This is material difference but given the vagaries of studio accounting and the fact that the two films were made at the same time, I would be shocked if Disney even mentioned any differences in the two films profitability on its upcoming quarterly conference call.

The Cars vs. Ratatouille comparison is trickier. Cars grossed $244 million in the US vs. $203 million for Ratatouille. Overseas, however, Ratatouille looks like it will easily exceed Cars, thanks especially to fantastic grosses in France. In fact, thorough the end of September, Ratatouille had grossed $223 million abroad, $6 million more than Cars. Furthermore, Ratatouille had yet to open in the United Kingdom, Germany, Italy, Greece, or Denmark. These countries produced a combined gross of $67 million for Cars, suggesting that the final worldwide tally for Ratatouille will exceed Cars....

....Despite the global box office success of Ratatouille, analysts are still worried its overall profit contribution will fall short of Cars due to the phenomenal success of merchandise related to Cars. I would never discount the merchandise and licensing teams at Disney but selling cars is a lot easier than a rat and gourmet food.

The bottom line is that the global box office performance of Ratatouille has probably been strong enough to mitigate the concern of analysts and generate more than enough revenue and profits to meet or exceed the conservative estimates in their spreadsheets that were likely influenced by the lagging domestic box office relative to Cars. Disney faces other earnings risks given the jam packed DVD release schedule this holiday season and fears about consumer spending but it appears that one risk feared earlier this year has failed to materialize.

Posted by Steve Birenberg at October 9, 2007 11:42 AM in DIS