Entertainment: Studios

For Disney, It's Woody to the Rescue

Toy Story 2's boffo box office is a gift Disney needed badly

It was an inside joke that had them roaring at Walt Disney Co. and Pixar, the companies that jointly produced the animated film Toy Story 2. Early on in the new sequel to the 1995 blockbuster, Mattel Inc.'s curvaceous Barbie leads other toys through a tour of a toy store. "This is the Buzz Lightyear aisle," says the All-American bombshell doll. "Back in 1995, short-sighted retailers did not order enough dolls to meet demand."

Out of the mouth of babes. Four years ago, Toy Story was a surprise hit. But Disney's vaunted marketing machine was slow in lining up sponsors, and retailers were caught off guard when the movie went on to generate nearly $192 million at the box office.EVEN BETTER. No way Disney was making that mistake again. Especially when the corporation was so desperately in need of some good news to boost its sagging fortunes. The first right move was to release the movie at theaters over Thanksgiving, instead of making it a straight-to-video sequel as initially planned. "We looked at films like Godfather 2 and Terminator 2 and said, `We can do that,"' says Pixar Chairman Steven P. Jobs. The result: the first-ever blockbuster sequel of an animated hit. TS2 impressed critics and sold a record $80.8 million worth of tickets in its five-day opening, and analyst Jill Krutick of Salomon Smith Barney Inc. estimates that it is on its way to earning as much as $350 million domestically (table).

This time, Disney lined up an impressive array of corporate sponsors, including McDonald's, Tropicana, and even NASCAR, which will jointly spend more than $50 million to help promote the film. Mattel, which didn't allow Barbie to be used in the first film, is now aboard in a big way. It's making many of the film's major toys, instead of Thinkway Corp., the smaller Toronto-based toymaker that had the rights in 1995.

Mattel, which has had its own woes, can certainly use the boost. But no one has more to gain from Toy Story 2 than Disney. Falling operating earnings at its studio and consumer-products units helped push overall third-quarter earnings at the company down by 71%.

Both areas should get a boost from Toy Story 2, figures Salomon's Krutick. She issued a report on Nov. 29 estimating that the movie should generate operating profits of $800 million over the next few years, second only to the $1.01 billion earned by Disney's 1994 smash The Lion King.

That's a lofty call, especially since Toy Story 2 faces heady competition from the latest kiddie phenomenon, Pokemon, and Sony Corp.'s Stuart Little. But Disney is already reporting big sales hikes at its online site, in large part because of Toy Story 2 merchandise, and it has a wide array of toys from the movies in its 600 Disney Stores.EVERY BIT HELPS. The $500 million profit Disney could reap from the film would be a much-needed windfall for Disney Chairman Michael D. Eisner and his company even after handing over 32% of the profits minus Disney distribution fees to Pixar--which paid half of the $80 million to make the film and some of the $25 million in marketing expenses. "We paid less to market this film because the first already had strong awareness," Eisner says, "and we don't have to share the profits with actors."

By itself, Toy Story 2 isn't going to turn around Disney, a $24 billion-a-year goliath. The company is still in the midst of cutting costs that Eisner admits got bloated after Disney bought ABC Capital Cities Inc. and ventured into regionalized entertainment centers. "When a company is as big as this, it takes a lot of things working together to make a big difference, and Toy Story 2 is just one of those things," he says. But when you look at Toy Story 2 and the rare ratings victory ABC won in November with its game show Who Wants to Be a Millionaire, Eisner will take his holiday blessings wherever he can find them.By Ronald Grover in Los Angeles, with Peter Burrows in San Mateo, Calif.Return to top