as part of our
The 2012 summer movie season was a disappointing one for movie
producers. Roughly 533 million Americans went out to their local
theater during the period, down 4% from a year earlier.
However, the Summer Olympics were a significant reason for that
drop. As well, the shooting at the Colorado premiere of the latest
The Dark Knight Rises
, likely kept some moviegoers away.
But even with the lower attendance, the season saw some massive
hits. The biggest box-office haul went to
, produced by
Walt Disney Company
) Marvel division. The film raked in a total of $1.5 billion,
including $620 million in the U.S., making it the
third-highest-grossing movie of all time. Other franchise-based
films, such as the third installment of the
Men in Black
series, also did well.
2013 Should Be a Better Year for Movie
Companies-Including Walt Disney
Fortunately, 2013 is looking better for film producers, starting
with the Thanksgiving-to-Christmas season. The latest edition of
Lions Gate Entertainment
) Twilight series,
Breaking Dawn: Part 2
, brought in $64 million over the Thanksgiving weekend, and MGM and
, the latest edition in the James Bond series, also did well.
The most-anticipated upcoming film is
The Hobbit: An Unexpected Adventure
, set to be released by
) and MGM on December 14. Walt Disney should also attract big
crowds with a 3D version of its 2001 hit
, produced by its Pixar animation subsidiary.
Disney also made news recently when it gained control of
arguably the most powerful franchise in the movie business-the
films-with its recent purchase of Lucasfilm Inc.
Smart Acquisitions Have Given Walt Disney a Big
Walt Disney owns the rights to some of the most popular movies
of all time. The company's core film brand is Walt Disney Studios,
which it founded back in 1950. The company bought Pixar, maker of
films, for $7.4 billion in 2006. It added Marvel in 2009 at a cost
of $4.2 billion.
Pixar's 3D release of
comes in advance of the next Monsters film,
, in 2013. The company also released its summer hit
on DVD on November 13. The Pixar acquisition has been hugely
successful for Walt Disney: it currently accounts for seven of the
company's 15 highest-earning movies of all time, and the average
revenue for a Pixar film is $595 million, according to
Marvel has also been a strong performer for Walt Disney. The
division is planning to build on the success of
by releasing a number of films featuring characters from the movie
in 2013, including
Iron Man 3
Han Solo Meets Mickey Mouse
In October, Disney announced that it will purchase Lucasfilm
Inc., which is wholly owned by
creator George Lucas, in a deal valued at $4.1 billion. Disney will
pay half that price in cash and will issue 40 million shares to pay
for the rest.
The company plans to grow and aggressively market the landmark
franchise by releasing a new
film roughly every other year. It also plans to explore
opportunities to bring
The first three
films were runaway hits in the late 1970s and early1980s, but the
prequels that Lucasfilm released between 1999 and 2005 were not as
well-received. Disney's long experience in moviemaking,
particularly using advanced techniques like those employed by Pixar
and Marvel, should give the new films a much better chance of
succeeding. The company can also use its established distribution
channels to boost sales of Star Wars merchandise.
Disney's Diversified Business Helps Ease the Volatility
Movies are hugely expensive to make, and a flop can put a big
dent in filmmakers' profits. (Disney itself is not immune to this.
released last spring,
reportedly lost $200 million.) Moreover, the complexity of modern
films increases the possibility of budget overruns and production
snags that can lead to costly delays.
However, Disney's movie business is just one part of its many
operations. Its studios supplied 13.7% of its sales in its 2012
fiscal year. That helps offset the risk of the odd poorly
Moreover, the company's other operations, including its theme
parks, resorts and cruise lines, have brighter prospects as the
U.S. economy picks up steam.
The stock has risen 46.6% in the past year, but it still trades
at 15.7 times Disney's last 12 months of earnings, in line with
(NasdaqGS: VIAB) and Time Warner. Disney also has a long history of
paying dividends. The current annual rate of $0.60 yields 1.22%.
Another Way to Profit From Blockbuster Films
If you want to profit more directly from box office sales,
in shares of major theater operators, which are first in line to
benefit from an increase in movie attendance.
Two of the biggest publicly traded theater companies in the U.S.
Regal Entertainment Group
), with 6,580 screens in 522 theaters and
(CNK), with 3,895 screens in 298 theaters in the U.S. and 161
(1,286 screens) in Latin America. For more explosive growth stock
picks, check out this free report.
This article by Chad Fraser was originally published on
Investing Daily under the title
Walt Disney Builds on Its Movie Making