Bloomberg News

Disney’s ‘Frozen’ Passing $1 Billion Cements Rebound

March 14, 2014

Disney's "Frozen"

Josh Gad, who voices a goofy snowman Olaf in Disney's "Frozen", poses for a photograph next to a banner of the film in Toronto. Photographer: Vince Talotta/Toronto Star via Getty Images

Walt Disney Animation Studios is about to reign again as the king of animated films, thanks to a movie released more than 90 years after Walt Disney made his first cartoon.

The studio’s smash “Frozen” has generated $1.01 billion in global ticket sales since Nov. 22. Opening today in Japan, its last major market, the film could push past “Toy Story 3” to become the top-grossing animated feature of all time.

That puts the turnaround that began at the Walt Disney Co. (DIS:US) unit with 2010’s “Tangled” into full bore. After creating the genre, Disney Animation for years went astray, its pictures overshadowed by hits from rivals like Pixar Animation Studios. Disney bought Pixar in 2006 and appointed its top officers, Ed Catmull and John Lasseter, to also oversee Disney Animation. With “Frozen,” the studio that introduced Mickey Mouse with “Steamboat Willie” in 1928 has cemented its comeback.

“It shows they’ve got the goods,” said Tom Nunan, an executive producer of the 2004 Oscar-winner “Crash” and a visiting professor of film at the University of California at Los Angeles. “It’s a great motion picture. You could call ‘Frozen’ an animated classic.”

Counting revenue from DVDs and television, Disney stands to make almost $1 billion in operating profit from the film, according to estimates from analysts from SNL Kagan and Gabelli & Co. That’s before merchandise sales around the world and the Broadway show now in the works -- and a possible sequel.

Disney Buzz

“That’s the magic of Disney’s business,” said Dan Salmon, an analyst with BMO Capital Markets Corp. in New York who has the equivalent of a “buy” on the stock. “You get a property and you can monetize it in ways that go beyond the box office.”

“Frozen” has done so well that analysts have boosted projections for the whole company. Salmon raised his estimate for Disney’s fiscal 2014 per-share earnings to $4.09 from $4.00 and predicts the movie division’s operating income will rise 48 percent to $979 million. Nomura Securities analyst Anthony DiClemente said “Frozen” could mean his $140 million estimate for the divion’s second-quarter profit is too conservative.

Paul Roeder, a spokesman for Disney, said there have been no announcements about a sequel. He didn’t respond to a request for comment on the movie’s profitability.

Through yesterday, Disney’s stock had advanced 14 percent since the movie’s debut. The shares were little changed at $79.94 as of 11:48 a.m. in New York.

Based loosely on “The Snow Queen” by Hans Christian Andersen, “Frozen” had a slow build. It was No. 2 in the weekend after its Nov. 27 U.S. wide release, behind Lions Gate Entertainment Corp.’s “The Hunger Games: Catching Fire.” It rose to No. 1 the following week and moved up to that slot again in its seventh week, a feat only six films have managed since 1984, according to Rentrak Corp. (RENT:US)

Marketing Machine

Theater attendance has been stoked by good reviews, repeat visitors -- a sing-a-long version was released Jan. 31 -- and social media buzz, some of it created by Disney. It’s posted more than 100 clips on YouTube.com, including videos showing how to create Princess Elsa’s French braids.

Merchandise is a big part of the strategy at Burbank, California-based Disney, which is the largest licensing company in the world. It’s sold almost 500,000 dolls modeled after Elsa and her sister Princess Anna; during a limited-edition offer in January, almost 5,000 were snapped up in 45 minutes at Disneystore.com, a record for the site.

Mattel Inc. (MAT:US), a Disney licensee, has sold more than $100 million of “Frozen” toys, while licensee Jakks Pacific Inc. (JAKK:US) has sold tens of millions of dollars worth, according to Sean McGowan, an analyst who follows the companies at Needham & Co. He said that means about a $15 million in profit for Disney.

Snow White

“A Disney holiday film release hasn’t done this well at selling toys in a long time,” McGowan said in an e-mail. “Typically, there is a short burst of sales around the release and product sales fall off a cliff.”

Disney spent about $323 million producing, marketing and distributing “Frozen,” which could generate $1.3 billion from ticket sales, digital downloads, DVDs and TV rights, according to Wade Holden, an analyst with the media research company SNL Kagan. Brett Harriss, a Gabelli & Co. research analyst, agrees on revenue but puts total costs at $350 million.

Disney Animation -- which made the first feature-length animated movie, 1937’s “Snow White and Seven Dwarfs” -- needed a shot in the arm. After a string of home runs in the 1980s and 1990s under then-studio chairman Jeffrey Katzenberg, Disney released duds like 2002’s “Treasure Planet” and “Home on the Range” in 2004. Meanwhile, others, most prominently Pixar, changed the landscape with hits like “Toy Story” and “Finding Nemo.”

‘Brain Trust’

The Disney studio had grown stodgy and bureaucratic, according to Steve Hulett of the Animation Guild in Burbank. Said Phil Contrino, the chief analyst at Boxoffice.com, “Disney was being written off.”

Then, in 2006, Disney Chief Executive Officer Bob Iger paid $7.4 billion to buy Pixar. While it remained a separate unit, he handed Catmull and Lasseter, the Pixar executives behind the groundbreaking “Toy Story” series, responsibility for Disney’s legacy animation business.

They gave animators and directors more freedom, keeping executives away from the filmmaking process, according to Brian Ferguson, who was a Disney animator for 23 years and now teaches at California Institute of the Arts in Los Angeles.

“They’re letting the department heads run their departments,” he said. “They encourage communication between departments; that was a huge leap. Things were so tightly micromanaged it was hard to make any progress.”

Realistic Flakes

Catmull and Lasseter brought to Disney Animation a version of what Pixar calls the “brain trust,” senior animators and directors who convene meetings to make story suggestions as projects are being developed, Ferguson said. Those sessions, which occurred every 12 weeks, involved about 40 directors, writers and artists who “bombarded us with notes and tore our film apart,” Jennifer Lee, who directed “Frozen” with Chris Buck, wrote in an op-ed piece in the Los Angeles Times.

Pixar’s leadership also moved Disney Animation to computers from hand-drawn pictures, a switch that made possible the realistic, three-dimensional snow falling in “Frozen.”

“The technical challenges were staggering,” said Charles Solomon, author of “The Art of Frozen,” a company-authorized book about the movie. “Ice is optically active. It reflects and refracts. How do you create that believably? It requires careful planning and a lot of computer power.”

Sequel Request

Those effects helped Lee, Buck and producer Peter Del Vecho capture this year’s Academy Award for best animated feature, the first for Disney Animation since the category was created in 2001. Pixar won a year ago for “Brave.”

“John Lasseter, all he wants is for us to dream up something new, that means a lot to us, and we always really, really appreciate that freedom,” Lee said backstage at the Oscars after receiving her award.

The husband-and-wife team of Robert Lopez and Kristen Anderson-Lopez won an Oscar for best original song for “Let it Go” from “Frozen,” the first time a Disney Animation film tune has won since “You’ll Be In My Heart” from “Tarzan” grabbed the honor in 2000.

The composers thanked Lasseter from the stage and then sang to him: “Happy Oscars to you; Let’s do ‘Frozen 2.’”

Indeed, the challenge for Disney is in following up with more. There’s a lot of competition, from DreamWorks Animation SKG Inc. (DWA:US), Comcast Corp. (CMCSA:US)’s Universal Pictures, 21st Century Fox Inc. and Warner Bros., which has a hit in “The Lego Movie.”

Favorable Odds

Pixar won’t be in theaters this year, having delayed its next project, “The Good Dinosaur.” Disney Animation releases “Big Hero 6,” an anime-style film based on Marvel Comics characters, in November. “Zootopia,” set in a futuristic world where animals live like humans, comes in 2016, according to Imdb.com.

The variety in the subject matter suggests Disney animators are willing to take risks, said Bill Capodagli, co-author of “The Disney Way,” a book about the company’s business. The fact that Lasseter and Catmull are stretching out release dates suggests “they’re not just throwing something out to meet a deadline,” he said.

The odds look to be in Disney’s favor when “Frozen” opens in Japan, where animated movies are popular. “Monsters University,” the 2013 sequel to Pixar’s “Monsters Inc.,” made $90 million in that country, 12 percent of the film’s worldwide gross of $743 million.

To overtake “Toy Story 3” -- which made $1.06 billion in theaters -- movie-goers will have to buy an additional $53 million worth of tickets.

Even if “Frozen” falls short, “it has definitely revived Disney’s animation brand,” said Boxoffice.com’s Contrino. “Disney will make a ton of money.”

To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net; Anousha Sakoui in London at asakoui@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net Rob Golum, Anne Reifenberg


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Companies Mentioned

  • DIS
    (Walt Disney Co/The)
    • $91.92 USD
    • 0.27
    • 0.29%
  • RENT
    (Rentrak Corp)
    • $85.69 USD
    • 0.88
    • 1.03%
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