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Disney's blockbuster growth leads Hollywood; franchises to fan 2019 results


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Disney's blockbuster growth leads Hollywood; franchises to fan 2019 results

Walt Disney Co. again led the way in breaking box office records in the September quarter. Performance from other major studios proved mixed, but executives touted several sequels from large franchises as likely to bolster results in 2019.

The year's box office receipts surpassed the $10 billion box office mark as of the week ended Nov. 11, outpacing sales for the previous two years as of the same time, according to data from Kagan, a media research group within S&P Global Market Intelligence.

Ticket sales were up 7.9% year over year, while admissions were up 4.0%, according to Kagan. The results were driven largely by films from Disney, which carried 27.7% of the box office.

A blockbuster deal nears

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Disney's studio segment is set to join forces with that of 21st Century Fox Inc. sometime next year, pending final regulatory approval of Disney's $71.3 billion offer to acquire much of Fox's global entertainment assets. The deal could put about 40% of the U.S. box office under one roof, according to Kagan data. During the September quarter, the two companies' studio segments, which include post-theatrical results and other studio productions, reported combined revenue of nearly $4 billion. Disney's studio reported revenue of $2.15 billion, up 50.2% year over year, due largely due to the box office performance "Ant-Man and the Wasp" and "Incredibles 2." Fox's studio revenue declined by 7.5% to $1.82 billion as its film slate shrank year over year in the third quarter, but television productions helped to drive an 8.2% gain in the studio segment's net operating income.

Disney's studio is also on pace for a solid fourth quarter. It drove a domestic box office record for the Thanksgiving weekend, with a forecast-stomping $84.5 million five-day opening for "Ralph Breaks the Internet." "Mary Poppins Returns," slated for theatrical release in December, is expected to be another family-friendly crowd-pleaser. Fox, meanwhile, saw its "Bohemian Rhapsody" beat forecasts with a $51.1 million opening in early November, and the Fox studio plans to debut the latest sequel in its profitable Deadpool series in December.

On a Nov. 7 conference call with analysts to discuss earnings, Disney executives said its studios are developing "a robust slate of original films exclusively for Disney Plus," the planned over-the-top digital service to be rolled out in 2019. These include live-action versions of "Lady and the Tramp" and a prequel to "Rogue One: A Star Wars Story." CEO Bob Iger told analysts that the company's digital strategy will not result in a shorter theatrical release window, however.

Franchise fanfare continues

Elsewhere, sequels and franchise films are expected to continue to drive big box office dollars heading into next year.

AT&T Inc.-owned Warner Bros. grew its studio-segment revenue by 7.5% in the September quarter, driven largely by the success of films like "Crazy Rich Asians" and "The Nun." In the fourth quarter, Warner Bros. will count the release of "Creed II," a co-production with Metro-Goldwyn-Mayer Studios Inc., which launched over the Thanksgiving weekend to a forecast-topping $55 million. The studio also drew a $62.2 million opening for "Fantastic Beasts: The Crimes of Grindelwald" in November and claimed a stronger-than-expected box office take for musical "A Star is Born" in October. Warner Bros. will close the year out with Justice League installment "Aquaman," which predicted will collect $55 million at opening.

Comcast Corp.'s Universal studio saw revenue grow 2.0% to $1.82 billion during the third quarter, even as operating income sank 48.1%. In discussing the results, Comcast executives pointed to difficult year-over-year comparisons and higher operating costs for its theatrical business, but noted that box office revenue jumped 16.7% across its studios on the success of "Jurassic World: Fallen Kingdom" and "Mamma Mia! Here We Go Again."

In the fourth quarter, Universal saw strong ticket sales for "Dr. Seuss' The Grinch" and "Halloween," and executives pointed to a ramp in animated content from the Illumination and DreamWorks labels as well as "the return of some of our best franchises" in 2019, including new installments from "How to Train Your Dragon" and "The Secret Life of Pets."

The two smallest of the large public studios, Lions Gate Entertainment Corp. and Viacom Inc.'s Paramount, saw divergent third-quarter results: At Lionsgate, studio revenue dipped by 1.7%, while Paramount reported growth of 24.7%.

On Lionsgate's earnings call, motion picture group head Joseph Drake promised better results ahead in 2019, saying the company is "positioned for the future," after adjusting its film release schedule for big releases from the "Hellboy" and "John Wick" franchises.

Paramount's film studio is coming off a major corporate restructuring that executives credited with the success of slate. They pointed to low-budget success "A Quiet Place" for supporting the quarter's results, as well as the sixth "Mission: Impossible" title, and said the new strategy promises more topline growth in 2019 after striking deals with Hasbro, including Transformers and G.I. Joe content and Skydance, which includes the upcoming James Cameron-produced "Terminator" series.