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Will "Cars" poor overseas performance & Silicon Valley's expanding stock options scandal eventually knock Pixar off its pedestal?

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Will "Cars" poor overseas performance & Silicon Valley's expanding stock options scandal eventually knock Pixar off its pedestal?

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This isn't how Bob Iger thought he'd be spending his August.

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Back in January, after agreeing to spend $7.4 billion to acquire Pixar Animation Studios, Disney's new CEO anticipated that the Summer of 2006 would be a time for great celebration. With "Cars" and the highly anticipated sequel to "Pirates of the Caribbean: Curse of the Black Pearl" both ruling at the box office.

Well, as it turns out, Iger was dead right about "Dead Man's Chest." That Gore Verbinski film started out strong and continues to be a phenomenon. According to Box Office Mojo, this "Pirates" sequel has earned (to date) $392.4 million during its initial domestic run. This -- coupled with the $392.2 million worth of tickets that this Jerry Bruckheimer production has sold (to date) overseas -- means that "Dead Man's Chest" has a worldwide gross (to date) of $784.6 million.

Given that "DMC" has yet to open in several key international markets, that puts "Pirates 2" on track to unseat Walt Disney Studios' previous top earner, "Finding Nemo." Which -- back in the Summer of 2003 -- also did phemonenal business. This Andrew Stanton film earned $339.7 million during its initial domestic run, with an additional $524.9 million coming from overseas ticket sales. All told, this Academy Award-winning Pixar production eventually pulled in a staggering $864.6 million during its worldwide theatrical release.

Whereas "Cars" ... To be honest, this John Lasseter film has spent the summer struggling to get out from under "Finding Nemo" 's shadow.

Of course, that probably has a lot to do with Disney & Pixar's decision to change "Cars" release date. Back in December of 2004, these two entertainment companies announced that they were pushing back the theatrical debut of this new animated feature from November of 2005 to June of 2006 because ... Well, to be blunt, because Disney & Pixar were looking to replicate the "Finding Nemo" phenomena.


Copyright 2006 Disney/Pixar

Make no mistake, folks. This was an incredibly cold-blooded move on Disney & Pixar's part. Art didn't really factor into this equation. Only commerce.

As Pixar CEO Steve Jobs explained in a 2004 earnings conference call, it was the $83 million difference between what "Finding Nemo" had earned domestically and what "Monsters, Inc." pulled in during its stateside run that eventually clinched the deal. After comparing the box office totals for these two Pixar productions, Steve said that:

"The comparison suggests Pixar can maximize return on its films by releasing them theatrically in the summer and on home video in the holiday season."

That was the theory, anyway. Which is why "Cars" was released domestically on June 9, 2006. With the deliberate hope that this John Lasseter film would then become the next "Finding Nemo."

But that didn't happen. After getting off to a somewhat slow start (Investment analysts had initially hoped that "Cars" would sell at least $70 - $75 million worth of tickets over its opening weekend. But the film only earned $60.1 million), "Cars" eventually went on earn $238.8 million (to date) during its domestic run. Which (admittedly) made this John Lasseter film the summer's second highest grossing picture. At least stateside.


Copyright 2006 Disney/Pixar

But overseas ... It's a completely different story, folks. Having only earned $128.1 million (to date) overseas, it seems that "Cars" has really hit the skids. Foreign film fans have yet to embrace this very American story about NASCAR racing & small town values. And when you closely examine the numbers ...

Film Title
Overseas Gross
"Finding Nemo"
$524.9 million
"The Incredibles"
$369.9 million
"Monsters, Inc."
$269.4 million
"Toy Story 2"
$239.1 million
"A Bug's Life"
$200.6 million
"Toy Story"
$170.1 million
"Cars"
$128.1 million

... you'll see that not only is this new John Lasseter film the poorest performing Pixar production (at least with overseas audiences), but then -- when you factor in the drag that these low foreign ticket sales has had on "Cars" overall box office -- ...

Film Title
Domestic Box Office
Overseas Gross
Worldwide Earnings
"Finding Nemo"
$339,714,978
$524,911,000
$864,625,978
"The Incredibles"
$261,441,092
$369,995,000
$631,436,092
"Monsters, Inc."
$255,873,250
$269,493,347
$525,366,597
"Toy Story 2"
$245,852,179
$239,163,000
$485,015,179
"Cars"
$238,823,000
$128,158,000
$366,981,000
"A Bug's Life"
$162,798,565
$200,600,000
$363,398,565
"Toy Story"
$191,796,233
$170,162,503
$361,958,736

... You'll see that "Cars" actually had to struggle in order to out-earn Pixar's first two theatrical releases, 1995's "Toy Story" and 1998's "A Bug's Life." Then -- were you to adjust the above box office numbers for inflation ... Well, let's just say that "Cars" would then find itself well to the back of the Pixar pack.


Copyright 2006 Disney/Pixar

Okay. I know. It may seem weird to be describing the year's second highest grossing film (to date) as a disappointment. But let's remember that we're not talking about the real world here, folks. But -- rather -- the investment community. Where initial financial projections & high expectations don't always jibe with reality.

Anyway ... Getting back to "Cars" overseas box office performance: Once word got back to Wall Street about foreign film-goers' lack of enthusiasm for this new John Lasseter film ... Well, that's when the long knives finally came out.

Those who had initially been reluctant to talk publicly about how disappointed they'd been with Pixar's latest production now gleefully came forward. Take -- for example -- Dennis McAlpine of McAlpine Associates. Who -- when asked by Variety what he thought about "Cars" -- said that "... It should have opened a little bigger, and it should have lasted a little longer."

Even the venerable old New York Times couldn't resist taking a poke at Pixar last week. In last Sunday's "For Big Media Players, Bold Moves Are Back" article, Richard Siklos got tongues wagging out west when he served up this particularly juicy pair of paragraphs:

As the analyst Richard Greenfield of Pali Capital noted in a report last week, Pixar's "Cars" has earned less overseas than the last Pixar hit, "The Incredibles," trailing it by an average of 54 percent in five countries, including Britain and Japan, after several weeks of box-office results.

While it may be too early to judge the ultimate success of the Pixar acquisition, "it is certainly worth considering how much lower Pixar's stock would be today" because of "Cars," Mr. Greenfield wrote. It was a polite way of asking: Just how much did Disney overpay?

Greenfield's throwaway comment about Pixar's stock price turned out to be quite prescient. Given that -- by the middle of last week -- both John Lasseter and Ed Catmull found their names prominently mentioned in articles about Silicon Valley's growing stock options scandal. At last Wednesday's quarterly earnings conference call, Disney officials tried to quickly dismiss this issue. With Thomas Staggs, the company's Chief Financial Officer, saying that it was " ... obviously inappropriate for (Disney) to comment on Pixar's stock option grants."


Copyright 2006 Disney/Pixar

However, given that the names of Walt Disney Feature Animation's new president, WDFA & WDI's new Chief Creative Officer and even the newest member of Disney's board of directors have now been linked to the ever-widening stock options scandal ... Well, that's not really the sort of press coverage that Bob Iger had been hoping that the newest members of his management team would be receiving right about now. 

Like I said earlier, this is not how Disney's new CEO thought he'd be spending August of 2006. Instead of getting the chance to just sit back & enjoy "Dead Man's Chest" 's extraordinary grosses, Bob now finds himself forced to do damage control on the Pixar situation.

Which is why -- as part of last week's quarterly earnings conference calls -- Iger insisted that he was perfectly happy with "Cars" box office performance. That -- in spite of the slow foreign ticket sales for this new John Lasseter film -- that Disneyana fans " ... shouldn't be surprised to see a 'Cars' based attraction at one or more of (Disney's) theme parks around the world." Bob then went on to say that " ... we see enormous potential for this entertainment property and believe (in "Cars" ) enduring appeal, particularly among young boys."


Copyright 2006 Disney/Pixar

But -- that said -- I'm also hearing that, as a direct result of "Cars" perceived weakness at the box office, that many people in Burbank are already expressing concerns about "Ratatouille." Not so much in the film itself. But -- rather -- in the release date that Walt Disney Studios has chosen for this new Brad Bird film.

Given that "Ratatouille" is now scheduled to open on the very same day that Michael Bay's "Transformers" film as well as "Die Hard 4" (Which is now tentatively titled "Live Free or Die Hard") hit theaters ... Well, that's some pretty tough competition for an animated feature about a rat who dreams of someday becoming a great French chef.

And if "Ratatouille" -- like "Cars" -- fails to meet Wall Street's initial expectations as to how much this Brad Bird film should earn over its opening weekend ... Well, all those whispers that you're hearing now about how the Walt Disney Company supposedly paid too much for Pixar Animation Studios? Look for those whispers to become shouts.

Which is why Bob Iger -- instead of being able to kick back and just enjoy what Walt Disney Studios has achieved this summer (I.E. The year's two top grossing pictures to date) -- is now attempting to do damage control. Asking Disney's PR staff to come up with an effective way to counteract all of the bad spin that's following in the wake of stories like Steve Zeitchik's "Will Pixar be pulled into stock storm?" Which opens with a line that Iger -- given that he's the guy who personally okayed Disney's $7.4 billion acquisition of Pixar -- probably doesn't want to read:

"Maybe Pixar doesn't walk on water."

Soooo ... As Bob straps on his water wings and then wades in to deal with Pixar's various PR problems ... What do you folks think? What's the proper way for the Walt Disney Company to deal with this particular situation? How exactly does the Mouse go about putting Pixar back on its pedestal?

Your thoughts?

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  • Wow...It's like the Cliffs Notes version of the past few months' worth of stories here at JHM.

    "I'm not saying Cars is a failure, but here's how Cars failed!"

    That is, of course, a paraphrase.

    But seriously, the film market has obviously changed; theatrical grosses are merely a slice of the pie, with DVDs and merchandising also representing large slices of the same pie.  I can't help but think that, when those figures can be factored in, Cars will be more successful than it's been made to appear.
  • ....Oh, and if it doesn't play well on airlines three months from now, Jim, you will be sure and TELL us, won't you?  >_<
  • Cars was a decent film, it had ridiculously amazing production value and a look only surpassed perhaps by Nemo. Even the computer animation students at my new media/film school said "wow, that movie looks really, really good!"

    The problem, perhaps, is that Cars has been like the child caught in the middle of two uncertain parents- Disney and Pixar, and now that they are back together things are decent, but the damage left (here in the form of diminished overseas box office) will likely not get any better.

    The thing I am holding my breath on is whether or not Disney plans to allow Lassetter, Andy Stanton and Brad Bird (and the rest of the extremely creative and talented Pixar team) to do what they do best, or whether, as what we have seen with Cars, they will interfere and try and put ideas of earnings for the mouse into the Pixar teams' heads.

    I think the way to fix Pixar is to let Pixar do what Pixar does best- make great, creative, original and remarkably entertaining family entertainment- lets face it, something the Disney company hasn't been known for in a very long time.
  • Every single movie studio in town would love to be saddled with the "disappointment" that is "Cars",  stuck with the "overpriced" Pixar, and forced to work with the "scandalous" Lasseter and Catmull.

    "Disappointing" would be this weekend's "Step Up" - it cost $12 mill to make, and looks like it will end up grossing $21 mill this opening weekend - but it grossed far less than Buena Vista's last release, Pirates 2 - so it must be a disappointment. If you're going to compare Pixar releases to Pixar releases....

    If you want to talk scandalous stock transactions - let's all look at Mr Eisner. During several years of his tenure, the Company had lousy results and fired legions of employees, but he still got his massive stock bonuses.

    "... It should have opened a little bigger, and it should have lasted a little longer." This is the best quote we could find - from an attorney. Why don't we ask a plumber, a waitress, and a pet shop attendant while we're at it? This quote is also true of every movie that's ever been released for the past 100-some years.

    No stockholder should ever allow Bob Iger to just "kick back" and receive his salary and bonuses, but Pixar is far from his biggest or most challenging problem. Long after Pirates 3 is released, and Disney Co is trying to figure out what to exploit next(bunnies, dragons, Santa Clause 6, Bambi 4) , Pixar will still be churning out money-making family-friendly films - most importantly, based on new ideas - that will last for generations.              What an awful problem to have.
  • I think that Jim has been right about a lot of what he's been publishing here about Cars' performance. He's not generally saying that Cars performed poorly, but he is pointing out that the investment community's unrealistic expectation that Pixar was going to hit a grand-slam, topping all that came before, is going to characterize it as something less than a glowing success. I don't think with the $7 billion that Disney paid for Pixar that anything less than "Pirates of the Caribbean: Dead Man's Chest" performance was going to please them.  It's difficult to imagine that the number 2 grossing movie of the year so far, with little coming from here on to overtake it for that position, to be characterized as a disappointment. I'll have to say, if you look at the numbers there are bigger disappointments out there this summer. Superman Returns is just one signifigant underperformer and don't think there won't be reprecussions over at Warner with the money they spent on that film.
        I don't think there's any way that Disney/Pixar comes out of this unscathed because they, with the purchase price paid for Pixar, set the bar way to high for themselves with the financial community and they are going to take some lumps for it. I think the aquisition was still a good move in the long run. Even with the gorilla-math Hollywood uses Cars will ultimately still be profitable.
        I live in Vegas, and the casinos open with all eyes looking for profitibility over building and opening costs in three months. Anything less is seen as a disaster. It's the same thing Wall Street is looking for in the Disney/Pixar deal: instant profitability. Fortunately, Wall Street has a short attention span. Bob Iger might not last the storm, but the deal will be profitable, slowly.
        I don't think that any amount of DVD sales are going to repair Cars being viewed as an underperformer though. If I recall correctly, The Incredibles was seen as kind of an underperformer on DVD. It didn't sell the ridiculous amount of copies that the investment community/retailers expected. I remember a reading a large article about this from a home video publication.
        Oh well, we'll only have to put up with the beating Cars is taking for a few more months and then it should be on to the next dead horse. I, for one, can say that I really enjoyed the film both times I saw it and look forward to bringing it home when it comes on dvd.
  • Ah Jim-

    Last week it was rip on Pirates and how it isn't making Disney money due to production and marketing costs and this week we're back to how Pirates is amazing and making tons of money.

    Once again Jim's back on his "Cars is a disapointment" kick.  He states that Disney may have overpaid for Pixar again ect.  Once again he's trying to stir the pot.  I again ask everyone to look and see how many hits and comments these articles about "Cars is a disapointment" and the "Pirates isn't the money maker you think"  get compared to his regular articles.  The man is good.  He stirs the pot well and knows how to rile up Disney fans while attracting more hits and comments to his web site.  However, I continue to believe that he will kill off most of his audience if he continues writing half factual stuff and flip flopping on his opinion.

    Here's a prime example in less than a week:
    This is from Jim's "175 million? 200 million?" ect. article about Pirates 2 talking about its box office take.
    "Which you'd think would be the cause of great celebration at the Mouse House. But instead ... Well, what I've been hearing is that the mood inside the Team Disney Burbank building is actually quite somber. That -- thanks to the high cost of producing two sequels to "Pirates of the Caribbean: Curse of the Black Pearl" back-to-back as well as the somewhat lackluster response to "Dead Man's Chest" merchandise -- it's now looking like it might be a couple of years before the Black Pearl finally sails into the black."

    Today in this article the mood is:
    "Well, as it turns out, Iger was dead right about "Dead Man's Chest." That Gore Verbinski film started out strong and continues to be a phenomenon."
    and
    "Like I said earlier, this is not how Bob Iger originally thought that he'd be spending August of 2006. Instead of getting the chance to just sit back & enjoy "Dead Man's Chest" 's extraordinary grosses, Disney's new CEO now finds himself having to do damage control on the Pixar situation."

    Man a lot changes in less than a week Jim.  Now Disney should be happy because the money if flowing in.

    Jim again is talking about "Cars" in terms of profits but again he forgets to state all the facts.  Yes, we understand how its done at the box office, but again the details of the amazing amount of merchandise sold is forgotten and people if you know merchandising and follow it you'll find out that the Cars stuff is flying off the shelves and so far is  set to outsell the other Pixar.  Even if Pixar movies continue to gross around what Cars did the merchandising alone will pay for the Pixar acquistion in proabably less than a decade.

    As Jim said "Okay. I know. It may weird to be describing the year's second highest grossing film (to date) as a disappointment. But let's remember that we're not talking about the real world here, folks. But -- rather -- the investment community. Where initial expectations & box office projections typically trump real world results."

    Yes Jim we are talking about the 2nd highest grossing film of the year.  That's great news especially considering a lot of other CGI films haven't done anything even close to these numbers this year.  And as for the real world hey that's the one I live in and would like to talk about.

  • Disney needs to *seriously* reconsider its schedule for next year.  First, there's MEET THE ROBINSONS going against TMNT.  Then, there's RATATOUILLE going against TRANSFORMERS and LIVE FREE OR DIE HARD.

    ComingSoon.com recently had a poll asking readers what summer 2007 release they're anticipating most.  RATATOUILLE came in second last - I repeat, second last.
  • Tom Brokaw said:
    "Disney needs to *seriously* reconsider its schedule for next year.  First, there's MEET THE ROBINSONS going against TMNT.  Then, there's RATATOUILLE going against TRANSFORMERS and LIVE FREE OR DIE HARD."
    ----
    First, let's talk about TMNT:  Nobody....NOBODY...cares about an expired 80's icon, except those who've grown up to be parents, or are fringe-niche enough to know that it's *not* that goofy weekday-afternoon thing.  Of which there aren't really enough to speak of yet.
    There are those hypnotized by the "schedule wars" article who say "Oh, but it's a major player", and then we point back to the fact that it's the Weinsteins.  Who will show -any- CGI they can grab their hot little hands on, so long as they don't have to make it themselves.  And just how long with they spend the rest of their life living down "Doogal" jokes?...Who can say?
    As for Die Hard, name the last Bruce Willis-headline hit.  Go ahead.

    Which brings us to Transformers--Okay, so Transformers has better looking trailers than Pixar.  So did "Godzilla".  And we all rushed down to that one on opening weekend.  (And when you're with Michael Bay, Murphy is alive and well and living on the Island.)

    Now, about that second terrifyingly convincing argument:
    ---
    "ComingSoon.com recently had a poll asking readers what summer 2007 release they're anticipating most.  RATATOUILLE came in second last - I repeat, second last."
    ---
    Wait...So--let me get what I'm hearing straight--you're saying that Pixar made a movie with a vague, unhelpful teaser that left the audience scratching their heads about the plot, and now they don't want to see it ahead of time, enough though they might once it opens and we see some more specific trailers?...
    Good heavens, man, THAT'S never happened before!!!!  0_0
  • Maybe it's me, but I just can't help but feel that too much stock (no pun intended) is put into what the investment community thinks, and that this site has become less and less about the stories behind the "magic," if you will, and more about Wall Street's reactions.

    I know I wasn't the only person who said a couple weeks back when Jim re-posted an old article that I wouldn't mind seeing more content like that on the site again.  Stuff focusing on the history aspect.  Yeah, sure, they may not generate as many comments, but the comments to stories like this are often negative, and frequently turn into arguments.

    Of course, I don't really care about all of the financial stuff.  Sure, the entertainment industry is a business, and their bottom line is, theoretically, profits.  However, personally, I care more about the artistic side of things, because I still think of film as an art-form, something that seperates me from the Wall Street crowd.  They don't care if a movie is good; they only care about profitability.

    What happened to the JHM that gave us those (often unfinished) multi-part stories about things like Light Magic or Star Tours?  Those were interesting, informative, and, well, useful.  It was fun to learn something about a favorite attraction, and then share the information I learned with my family while we were at Disney World.

    Honestly, it seems like (especially since the Save Disney stuff), this site has become more and more about the corporate/financial side of the Mouse, and less and less about the side of the Mouse that people love- the entertainment and the magic.  Before, it was like a magician sharing the tricks of the trade in a way that enhanced one's enjoyment; now, it really just feels like numbers in charts organized to make us second-guess Disney.
  • Well, I for one give Pixar the blessing to do an Americana film. Japan's biggest animation studio, Studio Ghibli, does Japan-centric films all the time. It's certainly made any lost thunder up in merchandising and eventual DVD sales. About Ratotouille, it should be huge in France at least! Seriously though it's a Pixar film, and if Cars domestic take is any sign, America supports Pixar. The sales will be back up worldwide

    Also, what's with this quote?
    >>Make no mistake, folks. This was an incredibly cold-blooded move on Disney & Pixar's part. Art didn't really factor into this equation. Only commerce.<<

    If you mean the actual film, get out of here. If you mean the placement of it's release, no crap, that's any Hollywood picture. Maximize on sales. Why WOULD art have a place in the release date of a film?
  • Anonymouse wrote:
    "Of course, I don't really care about all of the financial stuff.  
    personally, I care more about the artistic side of things, because I still think of film as an art-form, something that seperates me from the Wall Street crowd.  They don't care if a movie is good; they only care about profitability. "
    ---
    Jim seems to be using Wall Street as a credibilty "duck-blind"--
    Where he can stand back and say "Oh, they shouldn't have overestimated 'Cars' and expected it to outdo Nemo", but then spend the -entire- rest of the article quoting every single exec or Wall Street who ever said something bad about the movie, use it as evidence that "Wall Street is worried about Pixar's performance", and then use a "Whaddya think folks...Could they be RIGHT??" tagline to (hopefully) get our hands wringing--Obviously in the hopes that -we'll- also be picturing Disney execs weeping, gnashing their teeth, and saying "Why, oh, WHY did we ever buy Pixar?"
    In other words, he wants it both ways, he wants to keep his hands clean, and he wants to look like the responsible journalist who -isn't- playing "I can make 'em and I can break 'em" to "avenge" Lasseter, Roy Disney, or whomever.

    A week ago, we had Jim apologizing to  that JHM "wasn't playing its 'A' game lately" after its other number-crunch obsession, and Mousewatch Monday, he was back at it by the clock.
    There's a word for alcoholics when they do that with their own psychological needs.  And it's followed by the word "Intervention".  Which is when it isn't funny anymore.
  • DerekJ, with all due respect, sir, sarcasm is not needed toward my comments.  I wasn't trying to make an argument, just trying to state a few notes and an opinion.

    As a Disney fan, I want the company to succeed.  With that said, do you not agree that there are better dates for these films to be released on?  Would it not be better for these movies to be released on weekends with little competition, thus giving them head starts for long, excellent box office runs?
  • Here's a posting from overseas, from Vienna, Austria, Europe. Cars hasn't come out in the cinema's yet. And to be honest: I am still not sure whether I am going to see it in the there or to wait a couple of weeks more and order it on DVD from the States, cause it will definitely be available by then.

    To me, this movie like Home on the range plays way to much in an American setting to which the rest of the world might have difficulty connecting with. Furthermore: I really don't like the way the cars are handled to look human. It is just plain ugly.

    Just for the record: I adore The incredibles, TS and Monster's Inc. But I think it is okay for a company to have a movie every once in a while which is not the ultimate.
  • Where are all the articles telling us about ANT BULLY's box office?  
  • Tom Brokaw wrote:
    "With that said, do you not agree that there are better dates for these films to be released on?  Would it not be better for these movies to be released on weekends with little competition, thus giving them head starts for long, excellent box office runs?"
    ---
    Easily--Regardless of how good or bad Ratatouille looks (and for those who read Jim's "spoiler" article about the -actual- plot, it looks pretty good), it'll get a last-minute change to get a weekend by itself, but not for competition...It's just that July is for Big Action Blockbusters, and June is for Feel-Good Favorites, and Pixar movies have June written all over them.

    Quality or  not, the mindset of "Why are we playing chicken with the Transformers?" may set in to a more reasonable mid-June release
    Not that I think the Transformers will be stumble-free or live up to its fans' wishful-thinking, though...Remember, the final proof is in the popcorn:    Remember back when Cars was going to be "crushed" by Superman Returns?  :)
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