Walt Disney (DIS -1.01%) surprised investors last week when it released opening weekend numbers for Marvel Studios' Black Widow debut. After being delayed during the pandemic, the film made $80 million at the domestic box office and $78 million internationally.
While investors were disappointed with the film's second-weekend performance, which saw a noticeable drop in traffic at theaters, Disney said Black Widow's opening weekend numbers were the highest domestic opening weekend for a Marvel Cinematic Universe origin story after Black Panther and Captain Marvel.
To date, the film has grossed a total of $251 million worldwide, but that doesn't count the money Disney made on Disney+, where Black Widow was released as a premier access title for a $30 charge on top of the service's subscription fees. Disney said the film made $60 million on Disney+ through the opening weekend. That's nearly a third of the movie's total gross sales.
Image source: Walt Disney.
Black Widow's opening performance comes after the recent successful launch of Loki, WandaVision, and The Falcon and The Winter Soldier, which were released as exclusive originals on Disney+. Disney said Marvel fans had streamed nearly 3 billion hours of content on Disney+ to date.
The one thing Black Widow, Loki, and The Falcon all have in common is that these characters were unheard of before Disney acquired Marvel Entertainment in 2009. Disney has spent the last decade pulling from Marvel's deep character library, turning out a few $1 billion blockbusters along the way.
With 8,000 characters in the Marvel vault, Disney truly has a gold mine in its backyard it can mine for decades, and there's even more content to draw from in the Star Wars universe.
How do you value 25,000 characters?
Disney has had a phenomenal run at the box office since acquiring Marvel. Out of the top 15 films that have been the fastest to reach $500 million in box office receipts, Disney dominates, snagging 13 of those spots.
Three of the top five are Marvel films. The most successful Disney release to date is Avengers: Endgame (2019), which made a staggering $2.7 billion worldwide. Avengers: Infinity War (2018) made $2 billion and Black Panther (2018) made $1.3 billion globally. A few of the characters from Avengers, like Hulk and Captain America, were familiar to even non-Marvel gurus, but many of them, such as Ant-Man and Black Panther, were not household names.
Disney paid $4.2 billion for Marvel Entertainment, which appears ridiculously cheap in hindsight. Disney also has an expansive vault with Lucasfilm's Star Wars mythology, which spans over 25,000 years of history in the galaxy. That includes a treasure trove of 17,000 Star Wars characters. Disney bought Lucasfilm for $4.1 billion.
Hopefully, George Lucas isn't feeling sellers' remorse after Disney let Baby Yoda out of the bag.
A scene from season 2 of The Mandalorian. Image source: Walt Disney.
Before Disney made these deals, the company's studios segment produced $175 million in operating profit on $6.1 billion in revenue. After a decade of blockbuster hits from Marvel and Star Wars, Disney has emerged as one of the most profitable studios in Hollywood. In fiscal 2019, Disney's studio business earned $2.6 billion in operating profit on $11.1 billion in revenue.
With so many characters to mine, this segment will likely grow even more valuable over time. Each successful launch of a new Marvel or Star Wars movie fuels more interest in visiting Disney's theme parks, which only compounds the value of these blockbusters.
Disney is looking to combine the strengths of its original direct-to-consumer business, which CEO Bob Chapek calls the theme parks, with streaming once the parks fully recover. Disney has a vast amount of information on people who have visited its parks, and management can use that to grow Disney+ subscriptions, and perhaps even inform its content development.
Buy Disney for the endless character pipeline
Chapek sees an "endless opportunity" to mine the Marvel mythology, although the same could be said for Star Wars.
At a Credit Suisse Communications conference in June, Chapek said, "I think proof is being demonstrated that as you increase output and you go deeper and deeper into mining the Marvel mythology that it doesn't have to sort of tap itself out because as we've been able to demonstrate, we've got great stories to tell, and we're telling great stories."
It's very difficult for investors to put a value on a company with a character library this deep. Because of this, Disney stock may always be playing catch-up to its intrinsic value. This is why Disney remains one of the best entertainment stocks to buy and hold forever.
