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In Walt Disney Co.'s latest animated film, The Emperor's New Groove, the lead character -- an emperor-turned-llama named Kuzco -- recalls the good old days when he ruled the place and could kick anyone he wanted over the palace walls. Which is just about the way Disney itself must be feeling these days. Word from the front lines of the box-office wars is that the Emperor is getting his own you-know-what kicked around.
After 11 days in theaters, the film is suffering a very un-Disneylike spell, with a mere $24.2 million in ticket sales. That puts it well down the list of current releases, and while kiddies at home through New Year's Day will no doubt shove that number skyward, no one at the Mouse House is pretending their latest animated flick will be much of an earner.
It used to be that Disney just about owned the animation business. In fact, adjusted for inflation, three of the top 12 films ever to hit theaters came from Walt Disney (including, remarkably, Disney's biggest seller, the 1967 film The Jungle Book, which sold $485.3 million worth of tickets in today's dollars, according to the Internet site mrshowbiz.com).
LEAPIN' LIZARDS. But a funny thing has happened to Disney since 1994, when it set modern-day records for animated films with The Lion King. Simply put, the rest of Hollywood has finally caught up with the house that Walt built.
Since then, Disney has had its animated hits, including last year's Tarzan, which sold nearly $171 million worth of tickets. And earlier this year, it also generated solid box-office numbers with its computer-generated film Dinosaur, which collected nearly $138 million. But the price for each one of those represents a sharp escalation in production costs. Word in Hollywood is that Dinosaur cost almost $200 million if you factor in all those shiny new computers that Disney bought to make its prehistoric lugs come to life. As for Tarzan, it won't amass too much of a profit, having cost an estimated $150 million.
For years, Disney seemed willing to make just those kinds of investments in its animated films for the simple reason that they always made money. After The Little Mermaid in 1984, animated films returned to their central place in what had been Walt's grand plan to create characters that could be leveraged throughout his magic kingdom. Kids everywhere were buying Little Mermaid dolls, PJs, and lunch boxes, listening to the soundtrack, or catching the movie all over again on video. And when Disney released The Lion King, it hit animation's mother lode: a film that has generated better than $1 billion in profits for the company and is still doing a roaring business as a stage show on Broadway and elsewhere.
KATZENBERG'S GOLDEN EGG. But Disney is no longer in a league of its own when it comes to kiddy films. Dreamworks, the six-year-old studio run by onetime Disney film chief Jeffrey Katzenberg, hired a lot of talent away from his former employer -- and this year he trumped his former bosses with Chicken Run. The claymation epic became the first non-Disney animated movie to cross the magic $100 million threshold.
Just about every studio is making children's flicks that can go toe-to-toe with Disney's offerings. Last year, surprisingly, it was Sony, which had a megahit with Stuart Little. This year, Universal is shooting out the lights with Jim Carrey in the Dr. Seuss classic How The Grinch Stole Christmas. Indeed, the film seems to have stolen Disney's holiday fortunes. It is heading north of $220 million at the box office, and has left both The Emperor's New Grove and Disney's 102 Dalmatians in its wake.
Disney has done the wise thing in response to this new competition. In the face of the other studios' newfound firepower, it has stepped back from what had become a spending war. In the years that followed the The Lion King, animator salaries escalated faster than Alex Rodriguez' signing bonus. That has moderated some, and now Disney says it's cutting back. The animation workforce is down by around 10% this year, the company says, and salaries are coming down for some of the new hires. Moreover, Disney insists it wants to keep the cost of making animated movies between $80 million and $120 million -- part of an overall directive from Disney Chairman Michael Eisner to hold down spending companywide.
STUNG STING. Now, if you are to judge The Emperor's New Groove by Disney's cost-conscious new standards, it could be a difficult few years for Eisner and company. Made for an amount that Disney executives say is less than $100 million, the film is, quite frankly, a mess. Initially named Kingdom of the Sun, it devolved from a high-gloss musical to a slapstick comedy. Rock star Sting blasted the company, saying he was "angry and perturbed" when Disney junked six songs he had written -- and then asked him for new numbers in their place. "I wanted some vengeance," Sting told the Associated Press when the film was released.
Overall, say Disney insiders, the film had been troubled for years -- and no one was expecting much from it. That's one reason, they say, prospective moviegoers didn't see Disney's usual $100 million-plus marketing campaign. The result could be something truly unusual: an animated film that saddles Disney with a loss.
So the question remains: Can Disney cut costs while simultaneously battling Dreamworks, Universal, and all the rest for a piece of the kid-flick action? The answer: It's hard to say
MYSTERIES OF 'ATLANTIS'. The Mouse House could continue to spend small amounts -- as with the $15 million it put into this year's The Tigger Movie -- and still make a tidy sum, which is exactly what happened when that film sold $45 million worth of tickets and then went on to do well as a video release. Or it could continue to step up with bigger budgets for high-profile films, such as next year's Atlantis. Disney execs have owned up to pouring more than $120 million into the project and will almost certainly spend even more before its release. While the film is said to be aiming for a PG rating, it will likely feature aliens and other characters in an effort to reach a wider, older audience than many recent Disney animated films.
The irony is that Disney's dominance in animation -- the one sure thing the company could always bank on -- no longer exists. Like the lead characters in Atlantis, Disney is now on a difficult journey to keep ahead of Hollywood players eager to knock it off the highest mountain.
Grover is Los Angeles bureau chief for Business Week. Follow his weekly Power Lunch column, only on BW Online Edited by Beth Belton
Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.
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