Disney Needs to Explain Why Pixar is Taking a Year Off

Sometimes it's the little things that matter. And sometimes the little things are actually not so little.

On the one hand, one could argue that what's going on at Disney (NYSE: DIS  )  right now isn't a huge matter. It's been reported that 2014 won't see a Pixar project because the next film in line, The Good Dinosaur, needs a bit more work. The next Pirates of the Caribbean movie is being delayed, moving from 2015 to perhaps 2016. The credits are rolling on Jerry Bruckheimer's first-look agreement. Ant-Man -- whatever that is -- has seen its release date moved up.

On the other hand, I think there is something worthy of scrutiny hidden in the recent goings-on at the studio. While most observers are happy with the media conglomerate and its acquisition strategy, as championed by uber-CEO Robert Iger, and probably don't see anything here that's a big deal, I would argue that Disney at this point has to be cautious and not allow any potential for maximizing its assets to slip away. To me, that's what's happening with a year without a Pixar project.

The reason for the delay

From what I've gathered, the primary reason for the move of the Dinosaur flick is related to quality control; presumably, this means that the magical muses over at the Pixar brain trust went on strike, or something like that. What gets me about that is, as a shareholder, I see the billions spent to acquire the animation company and I expect every year to see at least one Pixar movie. At least one. Two would be even better, and I would think that increasing output should be the goal.

Since we've been led to believe that John Lasseter and his minions are geniuses when it comes to creating cartoons on computers, works full of story magic and visual intensity, and since a lot of shareholder bucks were thrown his way, I would imagine -- and hope -- that CEO Iger would agree with me that aggressive questioning about the delay is in order. It's even possible earnings might be affected if Disney does stick to a no-Pixar-film-in-2014 policy.

Trouble on the sea

Then there's the issue of the Pirates rearrangement. While some pundits have speculated that Disney might be better off releasing that film at a later time so as not to interfere with the sequels to The Avengers and Star Wars, I'm not of the opinion that this should be the case.

Disney should be making attempts to dominate any summer it can, and while cannibalization is always possible, or perhaps there's even the risk of audiences growing weary of tentpole action, it might be useful to see how such a loaded summer that synthesizes all corners of the company's acquisition strategy in such concentrated fashion affects the return of invested capital. It's been said before that Disney loves data (actually, what company doesn't, for that matter); I would have loved to have seen the data on box-office returns for a summer that contained Han Solo, Hulk, and Sparrow.

Why am I so concerned about stuff like this when there are probably bigger fish to fry within the company? Because the studio division is arguably a driver of Disney's overall brand equity. Not only that, but content is a key driver of direct ROI as well, even if you discount the synergy value.

It's difficult to make money from movies now that the DVD market is no longer what it used to be. Even though Disney sells a lot of Iron Man DVDs, the rest of its catalog has seen its challenges. Just checking the latest earnings report shows that, for the three-month and nine-month periods, studio profit was down 36% and 14%, respectively.

The assets have to matter

CEO Bob Iger cannot chalk up the Pixar/Pirates delay to nothing more than a need-for-more-creative-time excuse. I think the financial media has dropped the ball on this and reverts back to the thesis that Disney is golden just based on its collection of its assets.

What good are the assets when they are not being aggressively monetized? Again: Did Disney buy Pixar so that it would eventually release two movies a year, or did it buy the business so that Lasseter and his minions might occasionally take a year off?

The default argument will be that it doesn't matter -- the company is so massive that it can withstand such issues. Sure, but as a shareholder I want the best bang for my equity, and an insouciant approach to content creation/scheduling should not be tolerated by the board.

Increasing studio profitability is an opportunity for the company that Iger cannot ignore. Part of the plan should involve more movies from Pixar ... at least one per year.

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Read/Post Comments (9) | Recommend This Article (3)

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.

  • Report this Comment On October 11, 2013, at 1:57 PM, mdisalvio wrote:

    The comments made by Mr. Mallas above are a perfect example why you cannot combine artistry with a bottom line mentality. His sediments on having Pixar produce a film or two every year make me sick to my stomach. It's people like Mr. Mallas that continue to force garbage productions onto the consumer because the artist is not given the time to fully realize their vision. So, you have products being forced out the door when they probably should have had more time to simmer. I am sure Mr. Mallas would love Pixar to push out "Planes" or "Cars 2" quality IPOs once or to his pleasure twice a year than producing one piece of truly outstanding storytelling every couple years or so. His article and viewpoints are EXACTLY what is wrong with a corporate mindset mingling with artistic integrity. Mr. Mallas you are one of many very tiny minions of evil that are adversely affecting our collective conscious with your bottom line bile.

    Thank you

  • Report this Comment On October 11, 2013, at 1:58 PM, kariyanine wrote:

    I don't think it is necessarily a matter of Disney being golden because of its collection of assets, but more a matter of Pixar's film quality has dropped off a bit. Disney needs to protect the Pixar brand just as much as they need to

    Their last three films, Cars 2, Brave and Monsters University, while financial successes, are not regarded in the same light as past Pixar films. That is a problem, and a big one at that. If Pixar can come out of this "delay" with another homerun people will immediately believe in the brand once more but another stutter and the Pixar brand could become just another studio with no clout. What's worse, taking a hit in 2014 or losing the faith people have in the brand?

  • Report this Comment On October 11, 2013, at 2:21 PM, scottd90 wrote:

    "Ant-Man -- whatever that is -- has seen its release date moved up."

    Doing just a little bit of research would show that Ant-man is the scientist that created ultron in the comics (which will be the bad robot in avengers 2)

    Antman is part of the phase 3 for the marvel cinematic universe

  • Report this Comment On October 11, 2013, at 2:24 PM, vocal75 wrote:

    I seriously disagree with the article's author. If a company doesn't protect it's brand quality, then it is in real trouble. I'd rather Pixar take five years off and give us amazing quality films, protecting the brand name, than churn out a couple movies every year that are disappointing. DIsney 'brand name' started to tank when they started down the cheap-quels slippery slope. Maybe they were making the company money, but only in the short term. If you want the Disney co. to create horrible movies, just to get something out to the market, tell them to spin off another brand name and put all the 'acceptable for a young audience, but gag-able for adults' under THAT brand. Maybe such an idea would still make money, but not to the level that Pixar (etc.) is doing now because parents assume that the PIxar brand is not just kid-friendly, but /good/ too.

  • Report this Comment On October 11, 2013, at 3:41 PM, Sammy42 wrote:

    Thank goodness this author doesn't work at Disney. My only hope is that someone at Disney doesn't read this article and take it seriously.

    As an investor, I would MUCH rather see Pixar have no movie in 2014 but put out a great movie in 2015 instead. This assures the brand stays intact. Since Disney depends so much on their reputation, pushing Pirates and a Pixar film back is absolutely the right thing to do. How do you honestly expect Disney to pump out a Pixar movie at all costs, even if it's not ready? It would take years to have people forget your mistake (if they ever do).

    Please Disney, hold to your standard of quality. Do not dilute your brand because some people think quantity of quality matters. Ignore this article!!

  • Report this Comment On October 11, 2013, at 3:51 PM, cubsblue23 wrote:

    Another analyst that does not understand Disney, has done little research on the subject he is addressing, and is full of conjecture. It is no wonder that the market sees such fluctuations anymore. Guys like this know nothing about what they are buying and selling, they merely do what a computer screen is telling them to do and then start to think the company needs to be run differently. This investor mentality has no place in the business world. If Wall Street guys had a clue how to run a business they wouldn't be on Wall Street in the first place.

  • Report this Comment On October 11, 2013, at 6:40 PM, djplong wrote:

    The author of this article is EXACTLY why Disney lost so much luster years ago. They were simply interested in mining the vaults for money with shoddy and boring direct-to-video sequels of classic films. An entire theme park was designed by bean counters (we will spend $X on 'Y' number of rides and therefor we will have an attendance factor of 'Z' contributing to our profits). I'm SO glad that sort of thinking has been banished - at least for the time being.

  • Report this Comment On October 11, 2013, at 8:27 PM, chrislttur1 wrote:

    This is exactly why there's so many sub par movies out there. Focusing on the quick buck instead of the long term may reap you profits in the short term but it will not be sustainable in the long run. Purchasing Lucas Films, Marvel, and Pixar was a great investment by Disney and thus the quality needs to be protected. You could argue that they should sync their 3 major studios so there would be a guaranteed hit each year.

  • Report this Comment On October 12, 2013, at 12:23 AM, orphand wrote:

    The author doesn't know what Ant-Man is.

    Stopped reading after that point.

    Just kidding I had to go on to see what could lead a person to actually write something so bad.

    Steven Mallas apparently only cares about his stock in a company that probably goes up and down on the daily.

    PuuuuhhhhLEASE.

    Have you ever made a film before?

    I have.

    Have you ever written a script before?

    I have.

    Have you ever created a 3d model, animated it, and added a background with gorgeous lighting to compliment it?

    I have.

    Steven Mallas doesn't understand why he isn't getting things how he wants it when he wants it. It's people like that who truly bring out the senseless driven media drones who only care about the next big thing.

    Get over yourself and maybe learn to associate with what you're actually writing about.

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