Disney’s recent film disappointment The Finest Hours will cost the studio about $75 million in the current quarter, CEO Bob Iger told investors today at the Deutsche Bank Media, Internet & Telecom Conference.
The live action film opened in late January and has generated about $40.5 million in global ticket sales.
The loss comes in a quarter that also has “tough comparisons to a year ago when we had the results of Big Hero 6 [while] this year we had The Good Dinosaur.”
Still, he has little reason to complain with blockbusters including Star Wars: The Force Awakens, and Zootopia — which Iger says opened bigger than 2013’s hit, Frozen.
“We have a tremendous slate this year,” he told the group.
The line-up includes Rogue One: A Star Wars Story, a stand-alone tale due in December. It will be marketed “differently but aggressively,” he says. “There will be a need to explain when it happens and what it is, to position it differently from the [Star Wars] Saga films.”
The movie business generated a return on invested capital of about 30% last year, up from about 20% in 2014 and 10% before then.
In response to questions, Iger says he’s upbeat about the prospects for the Shanghai Disney Resort, which opens on June 16. Some 300 million people live within a 3 1/2 hour trip to the site, he says.
“It’s the biggest park we’ve ever opened on opening day,” he says. “It makes a loud statement. We’ve done things big there. We have the biggest castle.” Disney also was “careful about Chinese cultural elements. Being correct culturally instead of the opposite.”
Still, the venture will take a toll on Disney’s bottom line in the fiscal year that ends in September. It will have to recognize $300 million in pre-opening costs, but will just see revenues for a few months. “We’ve given no guidence on how it will do in 2017, Iger says.
China’s box office sales likely will surpass the U.S. over the next year or so, which makes the country increasingly important to Disney. “You can’t launch a global tentpole without pivoting to China,” the CEO says.
Although “it’s a fragmented marketplace,” he sees opportunities to sell licensed merchandise. “A lot of this can be made at price points that are affordable to a large part of the population. So we think we can leverage the success of the films we’re making and distributing there.”
Television is a different story. “Regulation is the biggest issue. We can’t launch a channel. But we can launch programs, and we’re looking for distribution partners like Alibaba and Tencent.”
Once again, Iger defended ESPN as investors fear Disney’s biggest profit generator has peaked as pay TV subscribers cut the cord or look for other ways to reduce their outlays.
“What we’re seeing in the marketplace is not much different from what we anticipated,” Iger says. Acknowledging that “we have seen erosion in the expanded basic bundle,” he says it will continue to be the dominant product for viewers.
Even so, ESPN will have to be part of skinny bundles offering fewer channels for a lower price. Dish Network’s $20 a month Sling TV — which includes the sports network — “has done well,” he says, and others are coming.
Consumers “have lost patience when it comes to finding things and using things,” Iger says. “As soon as you hit a speed bump technologically or digitally you just don’t want to tolerate it. That’s something the entire media industry has to be mindful of.”
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