Disney Smells a Rat

Poor Remy. The well-read rat star of Disney's (NYSE: DIS  ) Ratatouille has a tall task on his hands, dreaming of becoming a Parisian chef. Pixar's latest release also has the tall task of taking on John McClane and the blockbuster ghosts of Pixar's glorious past.

I won't tell you how Remy ultimately fares. The movie is so good that you'll want to find out for yourself, even if you don't have young children in tow. However, the box office receipts are in, and it's a mixed bag for the computer-rendered flick.

Ratatouille was good enough to vanquish the fourth installment of the Die Hard series to top the list of celluloid over the weekend. That's worth noting, especially since Live Free or Die Hard is the first film in the Bruce Willis franchise that wasn't slapped with an R rating, going instead with the more family-friendly PG-13 mark. Unfortunately, with an estimated $47.2 million in domestic ticket sales during its opening weekend, Ratatouille becomes the softest opening for a Pixar film since 1998's A Bug's Life.

That figure looks even bleaker when you consider the inflationary aspect of older releases coming out when individual ticket prices were cheaper. And the successful Shrek the Third release from DreamWorks Animation (NYSE: DWA  ) rang up a whopping $122 million over its opening weekend back in May.

To be fair, Pixar's earlier successes have come out either earlier in the summer (when there is less competitive product) or in early November (in time to cash in on the holiday rush). It also doesn't help that the corner multiplex is bubbling over with blockbusters right now. With supply outstripping demand, you're seeing some pretty funky sights on the silver screen. Just check out what happened to Spider-Man 3.

Marvel (NYSE: MVL  ) and Sony (NYSE: SNE  ) were banking on big things out of their web-slinging workhorse. They got them, initially. The film set an opening-weekend box office record with its debut two months ago. However, lukewarm reviews and a bottleneck of "must see" theatrical releases have eroded demand for the movie. By the time the final stateside box office receipts are counted, Spider-Man 3 will be the least-watched film of the series.

It all started with a mouse
Should Disney investors be worried, especially since Ratatouille lacked the opening-weekend pop of some of this season's other hits that tailed off so quickly? Not yet. For starters, there's the Fourth of July weekend coming up. That should keep Ratatouille's numbers from slipping too far during its second week on the big screen. The film is also getting overwhelmingly favorable reviews. At Rotten Tomatoes, a website that consolidates movie reviews, 95% of the critics tracked like the film. Put another way, just one out of every 20 are panning it.

No, the film won't go down as one of the most financially successful films ever made, but it will be a huge hit for Disney. Even if the final domestic tally clocks in at about $200 million -- a bit better than DreamWorks Animation's Madagascar and Shark Tale, which had similar opening-weekend numbers -- the film will be big for Disney.

Since last year's $7.4 billion buyout of Pixar, pessimists have been fearing that the family entertainment giant overpaid for a computer-animation pioneer that may have peaked three films ago. I don't see it that way at all.

Disney's reputation in theatrical animation is finally on the mend. There is no more settling for rushed direct-to-video sequel drivel. Pixar's proven think tank is taking control of Disney's flagship studio. It won't be long before you can start trusting the Disney brand again.

Financially speaking, Disney is also absorbing the high-margin half of Pixar's operations that it used to forgo in its joint venture. Even if Ratatouille scampers away after ultimately grossing around $172 million in stateside ticket sales, that will still be more than any in-house Disney release has generated in 13 years.

Riding the rodent
But this is about more than just the cinematic run, the DVD release, and the licensing opportunities (which include Mattel (NYSE: MAT  ) toys and THQ (Nasdaq: THQI  ) video games).

Those are all fruitful money trees, but one should also consider the tactical advantages of putting out a film that glorifies fine European dining. Disneyland Paris has had its share of hiccups over the past 15 years. It certainly won't mind the obvious promotional opportunities.

Disney also sent one of its two cruise ships to Europe this summer. Coincidence? With the company's fleet doubling in a few years, I doubt it.

Even passport-free landlubbers are likely to be touched by the film's release. How many of them do you think will find themselves flocking to Florida's EPCOT, making sure that they book dinner reservations at France's two signature restaurants, Bistro de Paris and Les Chefs de France? Sure, if Ratatouille was a monster standalone smash, one could imagine lucrative character-breakfast opportunities there, but the well is far from dry.

An emphasis on gastronomic delights ties in perfectly with the first table-service restaurant opening inside Animal Kingdom this year. Now that the success of Expedition Everest is keeping guests around longer and pushing operating hours later, Animal Kingdom may finally start milking some of the big-ticket dinner business that has been so elusive in the past.

Reports of Disney's merchandising efforts moving into fine cookware products to cash in on the film are also promising.

Those who write off Ratatouille's soft start as a disappointment are missing the bigger picture. In menu-speak, they've judged the menu based on the appetizers -- even though heartier treats await.

Other Foolishness you may be drawn to:

DreamWorks Animation, Marvel, and Disney are all Motley Fool Stock Advisor newsletter recommendations. You can screen that service over the next 30 days for free with a trial subscription. Mattel is an Inside Value pick.

Longtime Fool contributor Rick Munarriz is a sucker for quality animation. Yes, he owns shares of Disney and DreamWorks Animation. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 530629, ~/Articles/ArticleHandler.aspx, 4/19/2014 3:25:21 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 2.54 0.14%
NASD 4,095.52 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

4/17/2014 4:00 PM
DIS $79.99 Up +1.04 +1.32%
Walt Disney CAPS Rating: *****
DWA $27.37 Up +0.04 +0.15%
DreamWorks Animati… CAPS Rating: ***
MAT $37.47 Down -0.41 -1.08%
Mattel CAPS Rating: ****
SNE $18.71 Down -0.07 -0.37%
Sony Corp (ADR) CAPS Rating: **
THQIQ $0.00 Down +0.00 +0.00%
THQ, Inc. CAPS Rating: **

Advertisement