Disney's Numerous Future Potential Growth Catalystshttp://www.fool.com/investing/general/2014/03/25/disneys-numerous-future-potential-growth-catalysts.aspx Dan Moskowitz
March 25, 2014
Disney (NYSE: DIS) recently announced a lot of news at once. This news includes a third installment to the Cars franchise, a second installment to The Incredibles franchise, and new information about Star Wars: Episode VII. Disney acquired Lucasfilm for $4 billion back in 2012, giving it the rights to the Star Wars franchise.
The original Cars had a production budget of $120 million. It grossed $244 million at the domestic box office and $462 million at the worldwide box office.
The sequel, Cars 2, didn't perform as well at the domestic box office, but it performed better than the original at the worldwide box office. This likely stemmed from the movie taking place overseas. This seemed to be a strategic move by Disney, but domestic moviegoers felt let down. Cars 2 had a production budget of $200 million. It grossed $191 million at the domestic box office and $560 million at the worldwide box office. Looking ahead, it will be interesting to see if Disney goes for the domestic or international moviegoer.
The Incredibles had a production budget of just $92 million. It went on to gross $261 million at the domestic box office and $631 million at the worldwide box office.
Then there's Star Wars.
Star Wars news
We also know that JJ Abrams is the director, that John Williams is still the composer, and that Disney's open auditions called for a street smart orphan girl in her late teens as well as a smart and capable male in his late teens or early 20s. And according to The Hollywood Reporter, Adam Driver will play the villain.
Disney's approach of dropping small hints every once in a while is brilliant. In marketing, it has been proven that this is an effective approach, as it heightens consumer excitement.
Other reasons to consider Disney
Disney's future potential with Cars, The Incredibles, and Star Wars franchises can lead to revenue gains in each segment. In addition to aforementioned growth potential areas, these brands can be leveraged to the television market, implemented in theme parks, and be made into video games. Therefore, these brands go well beyond the box office.
Of course, Star Wars: Episode VII should be a massive success. The movie wouldn't even have to impress moviegoers to sell tickets. The brand is that strong. And in addition to future installments for the Cars and The Incredibles franchises, Frozen will have a sequel and a show on Broadway, and Shanghai Disney Resort is set to open on Dec. 31, 2015. Shanghai is a wealthy and highly populated city with more than 14 million people -- a very good combination for Disney.
Disney also stacks up well against entertainment giants Time Warner (NYSE: TWX) and Twenty-First Century Fox (NASDAQ: FOXA). First, consider top-line performances over the past year:
Twenty-First Century Fox has grown its top line the fastest, and that should be recognized. However, Twenty-First Century Fox doesn't have anything close to what Disney has in future growth catalysts.
Twenty-First Century Fox did deliver a 15% increase in revenue in the second quarter, primarily thanks to the inclusion of Sky Deutschland revenue and a 14% boost in affiliate revenue growth in its Cable Networking Program segment.
In regards to filmed entertainment and future brand potential, The Secret Life of Walter Mitty and Walking with Dinosaurs don't compare to what Disney has to offer.
Furthermore, while Twenty-First Century Fox is impressive, it doesn't compare to Disney in merchandising potential. With all the aforementioned movie brands, Disney will have extraordinary merchandising opportunities, especially with Star Wars.
As far as Time Warner goes, it