Disney's Empty Home

Ah... what a difference a change of the calendar makes.

Disney's (NYSE:DIS) movie division was on fire last year. The hits just kept on coming: Finding Nemo, Freaky Friday, and, of course, Pirates of the Caribbean: The Curse of the Black Pearl.

Studio divisions of competitors like Sony (NYSE:SNE), Fox (NYSE:FOX), and Time Warner (NYSE:TWX) also did very well with their outputs, but Disney's slate was a formidable force to be reckoned with; the Mouse voraciously ate its weight of box office dollars (according to the 2003 annual report, Disney took in $3 billion from theaters around the globe). It was a crucial driver of earnings and, perhaps more importantly, the perception that things were finally going right for CEO Michael Eisner.

Then came the response to the opening of Home on the Range last weekend. It ranked in fourth place, behind Warner Bros.' Scooby Doo film, with a gross of $13.9 million. A figure like that isn't what it used to be, especially considering that the movie couldn't even scare off Shaggy and company in their second weekend (the animated bovines should have brought along some Scooby snacks as a diversion).

A few reports have estimated that the budget to make the film may perhaps be greater than $90 million (and then, as we all know, there's the advertising, which can add many more tens of millions of dollars). The general rule of thumb is that a movie must make double its total cost to break even; obviously, this is a disturbing fact for shareholders. It tends to stimulate a traumatic flashback to the Treasure Planet debacle.

The company's film offerings haven't inspired moviegoers to enter the multiplexes in droves as of late. Products like Confessions of a Teenage Drama Queen, Miracle, and Jersey Girl haven't produced the stellar returns that spoiled shareholders last year. Of course, these disappointments can ultimately be offset by the booming DVD business that all studios are experiencing at the moment; nevertheless, as any stockholder will tell you, Disney has been on probation for a long period, and it would pay for all cylinders to be firing all the time.

Granted, no one can predict how well a slate will do, or how tough the competition is going to be at any given time (certainly the recent religious juggernaut, The Passion of the Christ, is proving an unexpected capturer of bucks that might otherwise have made it into Disney's coffers). Still, Chairman George Mitchell and Eisner et al. had better step up to the plate and address any shortcomings in upcoming strategies for their celluloid products to ensure that the rest of the year is much more animated.

David Gardner recommended Time Warner for Motley Fool Stock Advisor subscribers. Sign up for six months with a money-back guarantee.

Fool contributor Steven Mallas hopes Disney sees a happy ending for its studio division this year -- he owns shares of the company.