It's official: 'The Lone Ranger' was a flop
The movie may end up costing Disney up to $190 million
Disney (DIS) was trading lower at the beginning of Wednesday -- after investors showed mild disappointment in its earnings release. But looking at it as a whole, it looks pretty good until you make your way to the studio section.
Studio revenue was down but more important, "The Lone Ranger" is now officially a flop, and Disney will pay for it next quarter.According to the release, The company reported second quarter EPS of $1.03 versus the estimated $1.01, beating by $0.02 for a two percent increase year over year. Revenue was light at $11.58 billion versus consensus of $11.64 billion but sales were up 4% year over year.
Free cash flow was up 27%, cash provided by operations up 18% and net income grew by one percent -- all good metrics until you take a look at the studio line. Revenue decreased two percent year over year and operating income fell 36%.
The reason? The performance of Marvel’s "Iron Man 3" and "Monsters University" this quarter, versus Marvel’s "The Avengers" and "Brave" in the same quarter last year. In other words, "people liked our movies better last year." The company also mentioned marketing costs for "The Lone Ranger" that were charged this quarter.
But later, during the conference call Jay Rasulo, Disney's senior executive vice President and chief financial officer, said,
"Needless to say we’re disappointed with the performance of 'The Lone Ranger' and in light of the film’s box office results we expect to incur loss on the film in Q4 of between $160 million and $190 million."
The film cost $250 million to make but has grossed only $177 million worldwide, according to the Los Angeles Times. It has only opened in 40% of international markets bringing in a disappointing $86.9 million internationally.
Why did the film fail? If you ask Johnny Depp, it’s the critics’ fault.
Depp said, "I think the reviews were written 7-8 months before we released the film."
Co-star Armie Hammer, in the same interview, said, "[Critics] jumped on the bandwagon to try and bash it."
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Bill Stiritz owns more than 5% of the company, and has experienced an estimated $145 million in paper losses on his investment.
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