Avatar: The Way of Water's first global weekend box office tallies are in, and they've cast some doubt on whether the film will go on to be the hit Walt Disney (DIS -0.14%) is looking for.
The picture recorded $134 million in North America and $434.5 million worldwide, both of which came in significantly below earlier estimates.
While that kind of box-office debut would be stellar for most pictures, there's an incredible amount riding on The Way of Water. Should Disney investors be concerned about the early performance for its latest big release?
Image source: Disney.
Putting the opening in context
With more than $2.92 billion in global ticket sales, the original Avatar stands as the highest-grossing film of all time.
Even more stunning, the picture opened to a relatively modest $77 million at the North American box office and $241.6 million worldwide upon its release in December 2009. Spurred by incredible word of mouth and excitement surrounding the 3D-cinema technologies it pioneered, Avatar enjoyed fantastic longevity at cinemas and silenced doubters after what initially looked to be a disappointing debut.
If Avatar: The Way of Water goes on to have strong staying power, it could still be one of the highest-grossing and most successful films of all time. But that's far from a sure thing.
Heading into last weekend, Disney lowered its forecast for the The Way of Water's domestic opening to between $135 million and $150 million in ticket sales -- down from the initial internal forecast for a weekend take of more than $150 million.
The film's domestic opening frame fell short of Disney's revised target, and its international haul also came in substantially below industry expectations.
With director James Cameron having reportedly said that The Way of Water would need to finish as either the third-or fourth-highest grossing film in history in order to reach its breakeven point, that would suggest the need for roughly $2.1 billion in ticket sales before reaching profitability at the box office.
There's a non-dismissible possibility that the picture is on track to wind up being one of the most costly underperformers ever released.
Additionally, Disney has already planned the release of three additional sequels in the franchise for release this decade, with most of the principal photography for Avatar 3 already wrapped and substantial work on Avatar 4 and Avatar 5 already completed.
Cameron even recently said that he already had plans for Avatar 6 and Avatar 7, which would conceivably launch some time next decade.
The company has also made a sizable investment in building and maintaining its Pandora -- The World of Avatar park at Disney World, so underperformance for The Way of Water and the franchise at large could have negative ripple effects across multiple business segments.
Then again, it's still too early to label the recent release as a disappointment.
While The Way of Water won't benefit from the revolutionary freshness of 3D technology in the same way that the first film did, there are other factors that could help it have strong legs at cinemas. Word of mouth could still wind up being strong for the movie, and release timing should play in the sequel's favor.
In terms of big-budget, blockbuster competition, the new Avatar film won't see a major competitor released until Disney's own Ant-Man and The Wasp: Quantumania in mid-February -- and March is shaping up to be a relatively soft month for blockbuster new releases as well.
Avatar: The Way of Water should stay in theaters for a very long time, and there's still a chance that Cameron's latest epic will once again have naysayers eating their hats.
What does Avatar's opening mean for Disney investors?
When Disney paid $71.3 billion to acquire key 21st-Century Fox assets in 2019, Avatar was undoubtedly one of the more important properties the House of Mouse was looking to bring into its corporate fold.
Investors shouldn't panic based on The Way of Water's seemingly underwhelming debut, but it's certainly worth keeping an eye on how the picture does. The next couple of weeks should make the movie and broader franchise's future much more clear.
Right now, the numbers are a bit difficult to parse, but it's probably fair to say that Water's somewhat confounding opening performance comes at a time when Disney's overall film franchise film portfolio has weakened from its recent peak.
Some of this is undoubtedly due to pandemic-related industry shifts, but franchise fatigue and creative directions may also be playing a role.
While the company scored a massive win with Spider-Man: No Way Home (a co-production with Sony), its Phase 4 Marvel Cinematic Universe (MCU) films have been putting up softer performances compared to some preceding entries, and there's some concern the superhero craze is losing steam.
Additionally, Disney seems to be having a hard time figuring out what to do with Star Wars on the big screen, evidenced by a number of projects that were initially announced and then either delayed or canceled.
Disney is arguably still the strongest overall company in the entertainment industry, and it has an unrivaled collection of blockbuster franchises and production studios when it comes to the film and television space.
Long-term investors needn't rush for the exits and sell the stock because of Avatar's uncertain future, but The Way of Water is the company's most important release this year and a crucial installment in a key franchise, so the situation is worth monitoring.
