How Much Will Star Wars Episode 7 Gross at the Box Office?

When you think of Disney  (NYSE: DIS  ) , you're probably reminded of fairy tales, theme parks, and Mickey Mouse. But Disney has been slowly expanding its brand, purchasing Marvel in 2009 and Lucasfilm in 2012. The Marvel acquisition looks to have been a wise decision considering the movie successes of The Avengers and Iron Man.

But it can be argued that nothing is bigger than Star Wars. You might not feel that way due to the lackluster prequels, but Disney is a master at delivering what audiences want. Yes, expectations will be extremely high. And, to be honest, it will be nearly impossible to match the quality of the original Star Wars trilogy. That said, if we're only looking at this from an investing perspective, then Disney has enormous potential ahead.

Recent successful trilogies
Time Warner's  (NYSE: TWX  ) Warner Bros. delivered a smash hit with its Dark Knight trilogy. Batman Begins had a budget of $150 million, going on to gross $205 million domestically and $374 million worldwide. That seemed good at the time, but it was nothing compared to The Dark Knight.

With a budget of $185 million, The Dark Knight grossed $533 million domestically and $1 billion worldwide. Based on that success, Warner Bros. upped the stakes for The Dark Knight Rises. With a budget of $250 million, The Dark Knight Rises grossed $448 million domestically and $1 billion worldwide. While audiences enjoyed the third installment (8.6 of 10 on IMDb and 90% audience approval rating on RottenTomatoes.com), it wasn't as loved as the second installment (9.0 on IMDb and 94% audience approval rating on RottenTomatoes). This proves that a production company can't rely solely on a previous installment's success.

In other words, Disney had better make sure it delivers on all three upcoming Star Wars movies if it wants to see continued box office momentum. Star Wars is a more popular brand than Batman. Therefore, it holds even more box office potential.

Now let's take a look at another recent successful trilogy, at least from a financial perspective. Viacom's  (NASDAQ: VIAB  ) Paramount Pictures hit box office gold with the Transformers trilogy.

Transformers (the first installment) had a budget of $150 million, going on to gross $319 million domestically and $709 million worldwide. Audiences also enjoyed the movie, as evidenced by a 7.2 rating on IMDb and an 86% audience approval rating on RottenTomatoes.

Paramount Pictures bet bigger on the second installment, Revenge of the Fallen, going with a budget of $200 million. It paid off. Revenge of the Fallen went on to gross $402 million domestically and $836 million worldwide. However, the movie wasn't that well received by moviegoers, scoring 6.0 on IMDb and a 58% audience approval rating on RottenTomatoes.

Paramount Pictures backed off its investment slightly with the third installment, going with a budget of $195 million for Dark of the Moon. It went on to gross $352 million domestically and $1.1 billion worldwide. It seems as though Americans, who are used to the excitement of special effects, demand a quality story to go along with those effects.

Note: A fourth Transformers installment, Age of Extinction, is due to be released on June 27, 2014, and it will star Mark Wahlberg. Its budget: $165 million. 

What should be noted here is that aside from the Generation X crowd, Transformers was new to many audiences, making the special effects the primary appeal. And kids don't care as much about story lines as adults.

Star Wars won't have the same luxury, thankfully! Star Wars fans come in all ages, but most of them will not stand for a lackluster story to go along with superior special effects. Put simply, Star Wars will have to deliver a much stronger story line to see similar box office success to the Transformers movies. 

Past results help determine future success
Past results might not guarantee future success, but sometimes they do help. The Phantom Menace had a budget of $115 million, going on to gross $431 million domestically and $1 billion worldwide. The excitement of a new Star Wars movie had a lot to do with this, as audiences weren't very impressed. The Phantom Menace scored 6.5 on IMDb and had an audience approval rating of 61% on RottenTomatoes.

This led to decreased demand for Attack of the Clones. Despite similar scores of 6.8 on IMDb and an audience approval rating of 60% on RottenTomatoes, Attack of the Clones wasn't nearly as impressive at the box office. On a budget of $115 million, it grossed $302 million domestically and $649 million worldwide.

The budget for Revenge of the Sith was reduced to $113 million. Audiences enjoyed this movie the best; it scored a 7.7 on IMDb, and had an audience approval rating of 65% on RottenTomatoes. But it still didn't perform as well as The Phantom Menace at the box office, grossing $380 million domestically and $848 million worldwide.

Based on the numbers above, Disney needs to nail it on the first installment, otherwise momentum may fade. Disney hinted at a $200 million budget for Episode 7 (no title has been revealed yet).  

If we look at results for the trilogy above, these movies grossed between 5.6 times their budget and 8.7 times their budget worldwide, depending on the movie. Let's take the middle number for Revenge of the Sith at 7.5 times its budget and base Episode 7's expected worldwide gross on the rumored $200 million budget. That would lead to a worldwide gross of $1.5 billion. And that's just for the first installment. 

The Foolish bottom line
That might seem like a lofty target, but betting on Disney usually works out. Even if the estimate is off, Disney will have merchandising opportunities, Star Wars theme park attractions, television spinoffs, and more. Disney made $45 billion in revenue in FY 2013. If Episode 7 is successful, it would lead to several added revenue streams. However, if Episode 7 falls flat on its face, Disney is still diversified enough that it wouldn't have any long-term effects. Therefore, investing in the future potential of Star Wars presents upside potential with limited downside risk. 

What company is the real future winner in your living room? 
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.


Read/Post Comments (0) | Recommend This Article (1)

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.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2804213, ~/Articles/ArticleHandler.aspx, 10/23/2014 3:29:10 PM

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...


Advertisement