Walt Disney (NYSE:DIS) has completed its turnaround as a movie company.
It is hard to remember that the Disney motion picture business was once struggling -- some thought beyond repair. Before Pixar and Marvel, the Mouse House was a risky proposition. Through most of the 1980s, the hits were of the Honey I Shrunk the Kids variety, which at $222 million globally was a solid performer, and a cute movie, but it was not Guardians of the Galaxy in either gross receipts or acclaim.
During that period, even the animation division was turning out middling dreck like The Fox and the Hound, which delivered a scant $63 million in worldwide sales, according to Box Office Mojo.
It was not until 1989 when Disney found the winning formula again with The Little Mermaid. Though its $211 million haul was less than what Honey I Shrunk the Kids brought in, the film put Disney back on the path of delivering the princess fantasy to young girls -- a formula that would repeatedly prove lucrative in the years to come.
Disney had found the winning formula, and it was able to deliver variants of it across its other brands. Through its own animated releases, ones under its Pixar banner, and now films in the Marvel and soon-to-be Star Wars universes, Disney releases event films -- movies more or less guaranteed to be hits.
Now, in announcing a sequel to Frozen, the highest-grossing animated movie of all time, and a new standalone Star Wars movie, Rogue One, the company has nearly guaranteed itself $1.6 billion if things go poorly, with $2 billion being a possibility if the movies connect with audiences.
Let's look at the numbers -- Frozen 2
Frozen 2 (or whatever the title ends up being) is the safer bet of the two films. The first movie was a phenomenon among young girls -- and even boys. Though there will be at least a few years between the release of the first film (2013) and a new one (date not yet announced), Disney has shown with its Toy Story movies that children are willing to stick with a franchise for nostalgic reasons, even as they age out of the target audience.
|Movie||Year||Global Box Office|
|Toy Story||1995||$331 million|
|Toy Story 2||1999||$485 million|
|Toy Story 3||2010||$1.03 billion|
The audience for these films grew progressively bigger. The leap was not huge between the first two movies, but clearly the original fans stuck around and brought in younger siblings. By the third movie, enough time had passed that the original fans were old enough to have kids of their own.
Frozen 2 is likely to follow this path. Even if it only equals the $1.27 billion box office take of its predecessor, it will be a monstrous hit, but the ongoing cultural phenomenon the movie has become suggests it could add 10% to 20%, which at the high end of estimates, would push it over $1.5 billion in box office receipts before any adjustment for rising ticket prices.
Let's look at the numbers -- Rogue One
Predicting the success of a Star Wars spinoff is harder, because much of its box office fate depends on whether director J.J. Abrams delivers a good movie with the upcoming Star Wars Episode VII: The Force Awakens. History shows us that a bad first movie in the trilogy can dramatically hurt interest in sequels.
The Phantom Menace made over $1 billion globally, but the second episode in the prequel trilogy, Attack of the Clones, dipped to $649 million. The series only recovered with Revenge of the Sith, which closed out the trilogy for $848 million, still performing below The Phantom Menace.
We can assume The Force Awakens brings in $1 billion as the first movie in a new Star Wars trilogy. If well-received, the spinoff might be a billion-dollar movie itself. If it flops, the numbers could dip into the $600 million range of Attack of the Clones.
The path to $2 billion
It is a pretty good neighborhood to be in when disappointment is $1 billion for Frozen 2 and $600 million for Star Wars: Rogue One. But for Disney, it really goes well beyond these two movies and into whether the company can consistently deliver the quality films that ensure that the next entry into the series will be an even bigger success.
Pixar and Marvel movies get the benefit of the doubt simply because of their brand names. If Frozen 2 and the Star Wars films deliver, the company is not just picking up a potential $2 billion, it is setting up the next two movies beyond that.
Daniel Kline has no position in any stocks mentioned. He has not seen Frozen and did not care for the Toy Story films. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.