Disney's box office disaster
The entertainment giant aimed for the stars but crashed to earth with its action flick 'John Carter.'
By Zacks Equity Research
The Walt Disney Company's (DIS) science-fiction movie "John Carter" is creating a buzz, but for all the wrong reasons.
Disney is expected to register a loss of $200 million as the big-budget production turns out to be the biggest flop in its history, according to Reuters.
"John Carter" reportedly generated $184 million in revenue from worldwide ticket sales. However, Disney spent more than $300 million on production and marketing. It gets even worse as around half of the revenue generated by the film needs to be shared with distributors and movie chains.
Disney now expects its studio division to register an operating loss of $80 million to $120 million in the current quarter.
Revenue from Disney's studio entertainment unit declined 16% year-over-year to $1.6 billion in the prior quarter, reflecting few Disney branded titles in theatrical release coupled with lower DVD volumes. However, operating income increased 10% to $413 million, reflecting increased worldwide theatrical revenue and lower film cost write-downs, partly offset by decreases in television distribution and worldwide home entertainment results.
Disney has some of the biggest movies slated to be released this year, including "The Avengers" from Marvel and Pixar's "Brave." According to Disney, these films have enormous prospects and will generate significant revenues.
Disney is one of the world's leading diversified entertainment companies. It commands a formidable portfolio of globally recognized brands, primarily its namesake Walt Disney, followed by ABC, ESPN and Marvel Entertainment. These give the company a strong competitive edge and bolster its position in the market against other major players like News Corp (NWSA) and Time Warner (TWX).
We maintain a long-term "neutral" recommendation on the stock. Moreover, Disney currently retains a Zacks No. 2 Rank, which translates into a short-term "buy" rating.
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The company is scrambling to protect its equities arm, which could face declining volume and revenue as competitors close the gap.
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