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Disney’s Frozen Is Still Young


Disney's (NYSE: DIS  ) Frozen has been a tremendous success, but that's old news, right? Wrong.

The big news is that Frozen recently surpassed $1 billion at the worldwide box office, and that it won two Oscars: Best Animated Feature Film and Best Original Song. While those are impressive stats, Frozen's success is just beginning, which means the potential for astronomical future profits for Disney.

An interesting trend
No past trend is guaranteed to repeat itself, but looking at historical trends is one of the best ways to determine the odds of future success or failure. Disney plans on making a sequel to Frozen. Given the original's extraordinary success, initial demand for the sequel is likely to be high. However, in order to deliver sustainable profits at the box office and in-home, the sequel must deliver high quality.

Disney has already stated that it won't rush into anything, indicating that it wants to get the sequel right. This is a positive sign. Frozen could easily go from a hit movie to an enormously successful franchise that will lead to several movies, massive merchandising opportunities, and future theme-park attractions. As far as movies go, there's a certain trend that tends to take place for animated movie franchises, and this trend is good news for Disney as well as Comcast (NASDAQ: CMCSA  ) . 

Comcast's Universal Studios scored a big hit with Despicable Me. The original grossed $543,113,985 in worldwide box-office sales. Impressive, but nothing compared to the sequel, which amassed $970,761,885 in worldwide box-office sales. The third installment, rumored to be titled Minions, is set to be released on June 30, 2017. Since the third installment tends to be the peak for box-office sales for animated movie franchises, future potential is still high.

In regards to that trend, consider Ice Age's (20th Century Fox) performance at the box office. The original grossed $383,257,136 at the worldwide box office. Ice Age: The Meltdown grossed $655,388,158. Ice Age: Dawn of the Dinosaurs grossed $886,686,817. Ice Age: Continental Drift did $877,244,782. Notice the slight decline for the fourth installment.

DreamWorks Animation's (NASDAQ: DWA  ) Shrek saw the same trend. The original grossed $484,409,218 at the worldwide box office. Shrek 2 grossed $919,838,758. Shrek the Third grossed $798,958,162. Shrek Forever After grossed $752,600,867. Once again, notice the decline in box-office sales for the fourth installment. Fortunately for DreamWorks Animation, How to Train Your Dragon 2 will be released on June 13, 2014 and is still likely to be on the upswing. Considering that the original grossed $494,878,759 at the worldwide box office and sequels tend to perform much better, potential is high.

Future potential
If the original Frozen did $1 billion at the worldwide box office and animated sequels tend to perform better than the original, then the potential is very high for Disney. Also consider that recently, the third installment has been the peak, giving Disney even further profit potential.

Even if the sequel and a potential third movie don't meet expectations, it's already a near guarantee that Disney will make a strong merchandising play based on Frozen characters. Furthermore, the brand will be strengthened by a future Broadway show. If Frozen can be as successful as The Lion King on Broadway, then it will be a home run. Frozen's musical aspect gives it a chance to even outshine The Lion King on Broadway. 

Other factors to consider for Frozen's future potential: video-on-demand, streaming, yet to be released in Japan.

Successful companies know how to brand well, and not many companies are better at this than Disney. Once it has a winner, it will maximize that brand's potential. Investors have an opportunity to go along for the ride.

The Foolish takeaway
Frozen grossed north of $1 billion at the worldwide box office, but that might just be the beginning. Given the recent trend of animated film franchises peaking at their third installment, there's a lot more room to run. Also consider merchandising, in-home entertainment, Broadway, and Disney's ability to maximize a brand's potential. Please do your own research prior to making any investment decisions. 

Will the entertainment king also win in this arena? 
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 (1) | Recommend This Article (3)

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  • Report this Comment On March 08, 2014, at 5:07 PM, esxokm wrote:

    Very interesting article. I have a bit of a different take.

    I think "Frozen" is essentially old news at this point. I actually was thinking about this not long ago -- now that "Frozen" has, for the most part, finished its theatrical engagement, the company needs to look forward to the next cinematic catalysts. And therein lies a problem -- it would have been really nice to have had a Pixar film this summer. Unfortunately, that division is taking the summer off (Pixar should have worked harder and delivered the film on time, but that's another story).

    I didn't know the company was planning on doing a sequel. I haven't seen the film, but I have to say that it doesn't seem to lend itself to generating a sequel. Perhaps some sort of "Planes"-like spinoff movie might be appropriate, maybe one starring that snowman-thing called Olaf.

    It's hard to believe Disney could re-bottle this lightning. Perhaps the company could look at other features that may not have done as well but might justify a sequel. As an example, why not continue the adventures of "Wreck-It Ralph?"

    I'll tell you one thing -- wait until we get the comparisons in the relevant quarter on this one. What do they usually say in the discussion, something like "...compared to the prior year's quarter when 'Frozen' was released...".

    Good piece, thanks...

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Dan Moskowitz

Dan Moskowitz spends the majority of his time researching stocks. He believes that fundamentals, and logic pertaining to industry trends, win out over the long haul.

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