The most anticipated movie for the end of 2015 is unarguably Star Wars: The Force Awakens, which will be released on Dec. 18. Box-office receipts in advance of the film's release have already reached staggering numbers. And the hype surrounding the film seems to ensure that it will become one of the biggest movies, if not the biggest, of all time.
This is welcome news for Disney (NYSE:DIS), as the success of this film, as well as the successes of several upcoming Marvel Universe movies, will greatly affect the company's earnings. But will this segment of the business be able to generate enough revenue to help Disney recoup the losses it's seen in other areas of its business?
The full podcast can be heard here. A full transcript follows the video.
This podcast was recorded on 12/1/15.
Sean O'Reilly: OK, so the last business that Disney of course has their hand in is movie studios. All that. What's going on there? Will that save them?
Vincent Shen: Yeah. So we've kind of gone in order. We talked about how their media networks, it's still growing, but people have those concerns about the subscriber losses. Second-biggest segment, doing very well, they have this huge park down the pipeline. Now here is where I see the most potential. But the problem is, so, when we're talking about studio entertainment, which includes their movies, but also the consumer products segment, which has a lot of the products, that is, like, an offshoot ...
O'Reilly: Just say "Star Wars toys."
Shen: Yeah, exactly. An offshoot of all that IP, you have to keep in mind that these two segments together, they only make up about 14%, or studio entertainment made up about 14% of the top line, consumer products made up about 9%, so a much smaller piece of the pie. But the growth opportunities are huge.
For example, consumer products saw the most robust operating income growth in 2015 at 29%. So easily dwarfing, I think it was, like, the 6% or 7% that the media networks segment saw. And going to the title specifically, so, we talked previously about The Force Awakens, about the toys and the hype that's built up around this. So, showtimes, less than three weeks away, and some-box office predictions are kind of coming in anywhere between $150 million and $210 million, which would make it one of the biggest ...
O'Reilly: I think it will beat that. I really do.
Shen: ... of all time. We'll see.
O'Reilly: You saw the presale ticket numbers -- that was the highest of all time.
Shen: Yes, but before we get to that, though, the thing is, for December there's only been a handful of films that've even broken $70 million in their opening weekend. So it's generally not a month where you see those massive numbers, like the summer blockbusters. But the thing is, these films have legs. They end up running very well over the following weeks after the holidays. And bringing up those presale numbers shattered records.
So Star Wars: The Force Awakens has already sold $50 million in tickets a month in advance of the actual release date. And this doubles the previous record of The Dark Knight Rises, which sold $25 million. OK, another thing that you ... that kind of points in the direction of this being a huge, huge moneymaker is the fact that Star Wars: Battlefront, the game, came out earlier in November.
O'Reilly: Did you see the commercial they had with Anna Kendrick and stuff?
Shen: It looks amazing, and it set digital launch records for Electronic Arts over the past week. So again, another record-setting number for you to kind of think about there. And I think it will be very important how this movie does, because there's sequels lined up, there's one-off, there's kind of, like, spinoff films that are planned.
But that's not the only thing that kind of hit the news recently for their, at least for their studio entertainment. Because, like you mentioned, the Civil War trailer for Captain America, all these views, and this is where I think things really round out for this segment. Between now and 2019 there will be about 15 Marvel titles released in theaters.
O'Reilly: Oh my gosh.
Shen: Including huge sequels and new character launches, OK? So, keeping in mind the fact that the Marvel cinematic universe, for their movies, they've generated over $9 billion, and they average about $750 million in worldwide ticket sales per movie. So the thing is, for Hollywood, with something that you generally see is very uncertain with each movie release, sometimes you just get really unlucky and your movie does not do well. This, I don't think it takes all the uncertainty away, but you have a built-in fan base.
O'Reilly: Well, even because ... yeah. Well, not only that, but Ant-Man should make you a believer about these secondary character launches. Because, like, who the heck is Ant-Man?
Shen: Lesser-known characters still managed to draw over $500 million in box-office receipts, which is huge. And overall these Marvel films, since the earlier part of this deck, it's, like, early 2010, just a few years ago, every movie has seemed to trend upward in terms of box-office receipts for Disney and Marvel. Naturally, all this popularity around these characters in these movies spins into the consumer products, with toys and things along those lines. For Black Friday, two of the five most popular toys were from the Star Wars universe.
O'Reilly: This is not surprising. All my cousins love Star Wars.
Shen: Exactly. So though this might be smaller pieces of the pie for the company overall, I think their importance will definitely be growing as they make their investments in the space. They have all these titles lined up, things are looking very strong for these segments, and I think that between this, and parks and resorts, it'll help fill in some of that, the losses. Or the gap that's left by any concern investors might have with media networks. And it'll be really interesting to see how the company pivots as they need to in the future.
Sean O'Reilly has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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.