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Monday Mouse Watch : Why all the dough that "The Simpsons Movie" is earning is making Disney & Pixar executives say "D'oh !"

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Monday Mouse Watch : Why all the dough that "The Simpsons Movie" is earning is making Disney & Pixar executives say "D'oh !"

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Let's start with the news that may confuse some of you. In that there are folks at Walt Disney Animation Studios who are downright giddy that "The Simpsons Movie" has done as well as it has over the past 10 days.

"And why would WDAS employees be excited by the success of a 20th Century Fox film ?," you ask. Well, the huge grosses that "The Simpsons Movie" has been racking up since its July 27th release are now being seen as proof positive that there is actually an audience out there that's hungry for traditional animation. Which really bodes well for Disney's "Enchanted" 's release this Thanksgiving as well as for "The Princess and the Frog" come 2009.

Mind you, not everyone at the Mouse House has been thrilled by how well Bart & his buddies have been doing at your local multiplex. I am referring -- of course -- to the people over at Pixar Animation Studios. Who are said to be rather depressed that "The Simpsons Movie" has already earned $128.5 million during its initial domestic release. Which puts this David Silverman film on track to blow right past the $188.2 million that "Ratatouille" has earned to date during its stateside run sometime over the next three weeks.

Copyright 2007 20th Century Fox. All Rights Reserved

"And what's so bad about that?," you query. Well, to be honest, the folks at Pixar already have their nose out of joint over the fact that -- while this new Brad Bird film may be the best reviewed movie of the year -- "Ratatouille" 's box office still lags behind that of "Shrek the Third." Which -- to date -- has hauled in over $320 million during its initial domestic run.

Okay. So maybe it's not exactly fair to compare "Ratatouille" 's box office to that of "Shrek the Third" and "The Simpsons Movie." Given that only one of these animated features is actually an entirely new entity. Whereas these other two films are basically extensions of already well-established brands.

But nobody said that life is fair. More importantly, this is Hollywood we're talking about here, people. Where perception is reality. Which is why its going be difficult for the folks who work at what is arguably the No. 1 animation studio in the world to have their latest feature length cartoon coming in third at the Summer 2007 box office race once Labor Day arrives.

Copyright 2007 20th Century Fox. All Rights Reserved

Certainly the investment community has had trouble wrapping its head around this intriguing new development. Don't believe me? Okay. Then check on this excerpt from this past Wednesday's third quarter earnings conference call. Where Disney CEO Bob Iger and Chief Financial Officer Tom Staggs found themselves fielding questions about "Ratatouille" and Pixar. Take -- for example -- this exchange with Doug Mitchelson, who's an analyst for Deutsche Bank.

Doug Mitchelson: I wanted to see if you felt the Pixar deal is tracking in-line with your acquisition budgets given "Ratatouille," which despite its critical success, is performing domestically a bit below the prior Pixar films. Thanks.

Bob Iger: Your question about Pixar. First of all, when we evaluated the acquisition, we looked at their titles on a global basis, not just on a domestic basis, and we think "Ratatouille" is going to be an extremely successful global property.

We also believe that these are long-term products, meaning they will deliver value for the company, for a long period of time. What we have learned, when you put the Pixar name or the Disney name on a high quality animated feature, it delivers results or shareholder value for decades to come. Witness how we did recently with bringing "Peter Pan" out in the marketplace or "Little Mermaid." We think "Ratatouille," because it is the best reviewed film of the year, and it is as good as it is, will drive that type of long-term value.

Copyright 2007 Pixar Animation Studios / Disney Enterprises, Inc. All Rights Reserved

We also bought Pixar for multiple reasons. We clearly knew that we wanted to bolster our animation efforts, which are critical to the company, but they also brought to the company quality and creativity and a significant amount of technological innovation. So when we valued it, we clearly looked at the potential at the box office for their upcoming titles, and we also looked at the potential at the box office for the Disney titles that Pixar management and creativity would deliver. And we looked at all the other variables, like the long-term impact on the high quality of the company, creativity and bringing their great technological experience to us.

So we really believe that if "Ratatouille" ends up hitting the 200 million plus number that I mentioned in my remarks domestically, and it does well internationally, which we are optimistic about, we have got a good solid title for The Walt Disney Company from a value perspective for many, many years to come.

Now please note that "... if 'Ratatouille' ends up hitting the 200 million plus number" comment. This is in reference to a statement that Iger made earlier in this same conference call, where he said that ...

Copyright 2007 Pixar Animation Studios / Disney Enterprises, Inc. All Rights Reserved

... "Ratatouille," the best reviewed movie of the year, is on track to see over $200 million domestic box office, and is just now beginning its broad international rollout."

Now what's significant about Bob's comments is that they're the first real acknowledgment from senior Disney officials that "Ratatouille" is no longer expected to earn as much as "Cars" did last summer. Which (let's remember) was perceived as something of a disappointment, given that this John Lasseter film only earned $244 million during its initial domestic run.

Of course, what wound up redeeming this particular Pixar production was the fact that Disney Consumer Products was able to move a ridiculously large amount of "Cars" -related merchandise over the past 15 months. As Tom Staggs recounted in last Wednesday's earnings conference call:

 Copyright 2007 Pixar Animation Studios / Disney Enterprises, Inc. All Rights Reserved

The Consumer Products revenue from "Cars" is really kind of a phenomenon. It is our most successful new film, new animated film franchise, since "The Lion King." And so any film that we would release in the last 10 years would pale in comparison to where "Cars" has been. We are obviously thrilled with that, and hope to see "Cars" continue. "Ratatouille" has a more limited Consumer Products program, as you might imagine.

That " ... 'Ratatouille' has a more limited Consumer Products program" comment is significant as well. Given that this is Mouse House management's way of acknowledging that the Cavalry will not be coming over the hill this time around. That -- at least when it comes to this particular Pixar production -- what you see (i.e. box office totals) is what you get.

And -- yes -- I know. "Ratatouille" has yet to released in a number of significant markets overseas. As Dave Miller of SMH Capital pointed out in his question to Bob Iger last Wednesday:

Copyright 2007 Pixar Animation Studios / Disney Enterprises, Inc. All Rights Reserved

Dave Miller: We noticed that for the European release of "Ratatouille," the release by country is somewhat staggered. I don't think the film is set to be even released in some of the Top 5 markets, in terms of screen counts, until the fall. I think you have got Italy on October 19th, the U.K. on October 5th. I think Germany is on October 3rd. Those are all top five markets in terms of screen count. Other than the overall competitive situation with flows of product out of the U.S. into the European market place, is there any other reason for that?

Bob Iger: No, you hit it on the head Dave. We are staying out of the way of some significant competition. You wouldn't want to compete against "Harry Potter," as a for instance in the U.K. We have stayed out of the way of "Shrek" and some of those other really big titles. We do open in a number of key markets this coming week. It is opening in France as a for instance. But the rollout is what I will call staggered for the reason that you cited - to basically create a competitive environment that we feel is healthy for the film.

So obviously the jury's still out as to how "Ratatouille" will do during its overseas run. Indeed, we may be well into the late Fall of 2007 before we finally get some definitive numbers on how this new Brad Bird film did in its foreign box office run. But given that Pixar's latest is now only being shown in 1940 theaters in the U.S. (Down from the 3940 that "Ratatouille" debuted in back on June 29th), it's fairly safe to say that the stateside portion of this new CG feature's theatrical run is officially winding down.

Copyright 2007 20th Century Fox. All Rights Reserved

Oh, sure. Given that this Pixar film will continue to play in U.S. theaters 'til at least Labor Day, it's virtually guaranteed at this point that "Ratatouille" will earn $200 million domestic (Thereby granting this new animated feature really-for-real blockbuster status, at least by Hollywood-of-2007 standards). That said, this new Brad Bird film is still going to wind up earning around $40 million less than "Cars" did. Which (As Doug Mitchelson's question last week proved) is going to get Wall Street talking.

Particularly since -- as part of this past Wednesday's third quarter earnings conference call -- Iger & Staggs had to admit that ...

... At domestic theatrical distribution, the strong performance of "Pirates of the Caribbean: At World's End" was offset by higher distribution costs driven by marketing expenses for Disney/Pixar's "Ratatouille," which was released later in the same quarter.

Translation: Walt Disney Studios had to spend so much on the proper promotion/launch of "Ratatouille" that these expenditures actually began eating into the profits that "Pirates of the Caribbean: At World's End" was generating for the company. And then when you consider that -- in spite of all the extra dough that the Mouse spent on marketing this new CG movie -- "Ratatouille" still managed to miss the investment community's opening weekend expectations by a very wide margin ... Well, is it any wonder that many Disney & Pixar officials then began channeling for Homer Simpson and said "D'oh !"

Your thoughts?

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  • I'm not gonna get into the "Pixar bashing" thing, but may I just say that "The Simpsons Movie" shouldn't really be compares to kid's movies, because it's simply not one. So, I think to compare just cause they're both animated, as opposed to their content, is unfair.

    That being said, I've seen the movie twice, am seeing it a third time tomorrow, and think it more than deserves the Oscar next spring.

  • An interesting number comparison -

    Second weekend of domestic release, percent drop from previous weekend:

    Ratatouille dropped 36%, while Simpsons dropped a staggering 60%. The Simpsons would not appear to have similar staying power.

    Too much $$$ spent promoting Ratatouille? Huh? Where was it spent, cause I didn't see it. Opening weekend numbers depend on brand familiarity - which Disney Co didn't establish for Ratatouille, but Simpsons had 20 years of  - and marketing, which again Simpsons went gung ho on. It was impossible to miss the coverage of the 7-11's that became national Simpson ads, plus Burger King national ads. Disney Marketing put an inflatable slide on tour and said they just don't know how to market the movie - tanking Ratatouille's chances from the start. If they spent too much, there must have been some really nice executive parties that didn't raise any general public awareness.

    Wonder if the analysts are asking about the licensing fees paid for the rapidly sinking Underdog movie, or the acquisition fees of Fox Family Channel - fees that were paid in cash, not stock. At least the suits sounded like they had answers ready this time, having to explain to a so-called analyst that some decisions require planning longer than three months out. Also nice to hear that Cars merchandise was performing somewhat adequately. Ratatouille merchandise would be selling too if any was displayed outside of the Disney Store. Disney Consumer products got WalMart to carry lots of Disney Fairies junk, but they couldn't talk the Mart into carrying one Ratatouille cooking set? Sounds like Disney Marketing isn't the only Disney division trying to tank this movie.

  • Here are the funny facts:

    1) Jim doesn't mention that The Simpsons Movie box office dropped around 65%. This would never slide with a Pixar movie.  In fact Jim even stated after Rat's first weekend that it would probably slide around 50% because everything else was.  So Jim speculates that Rat will probably have a large drop.  It didn't.  Then he ignores it when the Simpsons do.

    2) Jim states that the Simpsons Movie has a good chance at catching Rat in 7-10 days.  I'm no box office genius but I know that has no way of happening.  More than likely mon-thurs Simpsons will make around 4 million per day for a total of around 140-145 million and probably around 15 milion for fri-sun for max 160 million.  Add another 12 million for the next mon-thurs (which I don't think it will do) and you're still going to be 20 million short of Rat domestically.

    3) Jim states in past articles that Walstreet will be worried if Rat doesn't do 200 Million, and now that it looks like it will,  "Wallstreet" will worry because it won't meet Cars numbers.

    4) Jim still hasn't given Cars full credit for the money it has brought in merchandise wise.  Sure he quoted Disney stating it was the biggest merch movie since Lion King but never gives any numbers.  Jim this movie was HUGE.  Over 450 million worldwide in box office, big money on DVD and over a billion and a half already in merchandise with a new line of toys shown at Comic Con.  It has another huge year ahead of it merch wise and all we ever here is the 240 million domestically.  Money is money Jim and Cars is bringing in a lot of it.

    5) Another Rat article?  Didn't Underdog open over the weekend at a disappointing 3rd place and only $12 million total?  That has to be disappointing those are Country Bear type numbers, but we get another Rat article.

    I could list another five but what is the point.  Heck I really shouldn't write at all because it's just another hit and comment that Jim is really looking for, but hey it gives me something to do, and it's fun to point out Jim's inconsistencies ;)

  • Wal-Mart had an end-cap display of toys for "Ratatouille," included carded action figures, smack and yak plush, an interactive sniffing Remy and a great board game takeoff of the old Mousetrap game set in a kitchen. The stuff sold out quickly and hasn't been replenished.

    Maybe by the time the video is released, we'll see a second wave of "Ratatouille" merchadise. I don't think its merchandise will approach "Cars" -- but it's unlikely any Disney film is going to for many years to come. "Cars" is the new cash cow, replacing Mickey & gang, Pooh, the Princesses and Pirates. I'd even bet that "Transformers" isn't enjoying the same merchandising success as "Cars." (Anyone know where I can find a Tongue McQueen for retail?)

    Pixar and Disney did err on the Ratatouille wine deal with Costco -- seems that it's against the law now to use cartoon characters to market wine. I think the wine industry was included with beer and tobacco since the days of Spuds McKenzie, the Hamm's Bear and the cartoon Camels are long gone.

    Of course, the California wine industry couldn't have had anything to do with sounding the alarms since Disney-Pixar's "Ratatouille" deal was for French wine ... it doesn't matter that Ron and Diane Miller, Fess Parker and John Lasseter all operate wineries.

  • I read a couple places that Disney and Pixar did not expect to beat Shrek the Third at the BO; this was before Shrek3 was even released.  Given the $400+ Shrek 2 made, Disney/Pixar...hell even DW, knew Shrek 3 would end up in the $300s.. so yeah I doubt they are that shocked and/or broken up over it.

    Let us also remember that the Simpsons Movie has been awaited for YEARS.  And as I said in a previous comment section, the only thing it and Rat have in common is that they are animated.  

    Pixar is about telling great stories...its true.  This is why Pixar is the number one animation studio in the world.  I don't mean to piss off the artists at Pixar or in the animation industry (hell i am one of them) but the average joe doesn't go to a Pixar film to see amazing visuals...they go to see a great story.  Pixar is known for telling great stories...the movie going public TRUSTS, that when they go to a Pixar film the story is going to be really good; the fact that they also sport amazing visuals is a plus.

    This summer Pixar told another great story.....mission accomplished.

    I get the feeling Jim was as giddy as a school girl writing this article..."I was SOOO right!!".....not really no.  Listen to what Bob says about waiting until international BO rolls in.  Did Rat disappoint domestic?  Yeah a little......Did Pirates3 disappoint domestic?  Yeah a little....but Bob is happy as a clam over Pirates3's numbers...now why is that....its not #1 for the summer...hell it might end up being #4, wasn't it projected to dominate the summer?  Isn't that what Wall Street was expecting? Take a look at those worldwide numbers, $950 million...wowzers...

    If anyone on Wall Street or anywhere else, thinks that every Pixar film is going to make $250+...they are drinking too much of the kool aid....


  • I think the real problem that Jim isn't looking at is Disney's utter failure to sell "the best reviewed movie of the year".  Yes I know he wrote that article on how Disney didn't greenlight Ratatouille and therefore wasn't sure what to do with it but really that's just insane.  You really mean to tell me that Disney can't sell a movie about an animated rodent?  DISNEY?!  Why don't I see any mention of all the marketing tie-ins that Disney used for the movie like the Simpsons and Shrek used?  Probably because they're weren't any!

    Compairing this movie to the Simpsons is entirely unfair as well AND unwise numerically.  The Simpsons have had almost TWENTY years of televised buildup to that movie and one of the most brilliant marketing campaigns in history.  Forget Pixar, it's Disney Marketing that really should be ashamed.

    And why is Iger talking about the stiff competition in other countries when he obviously is ignoring the fact the company basically fed Remy to the wolves here in America?

    Also Jim, considering I work in merchandising I can explain that Ratatouille's merchandise is selling out just fine thank you!  Sure it may not be at the level of Cars but NEWSFLASH:  Cars have always been popular toys since the automobile was invented.  Please see wheels, hot.  For the life of me I don't understand the whole "Ratatouille's merchandise is gonna sell disappointing numbers" claims when: a) You aren't looking at the numbers every day.  b). You aren't IN THE STORES watching it sell out. and c). Obviously nobody claiming that Remy's plush wouldn't sell well has seen one yet because they're friggin' ADORABLE!

    Also, way to completely miss the point of the movie Jim!!!

    (As an aside:  I have no idea how WALL-E is gonna be marketed.  None.  You want a movie in fiscal trouble...)

  • wow simpsons and ratatouille in the same story........ how ridiculous and desperate is jim getting.

    get over jim the rat will reachthe 200million you thought would never reach and it will most likely keep going past that.

    Then wait till the dvd comes out, it will sure be profitable

  • Not to pile on here, but this article is another head-scratcher.  

    Drawing conclusions about 2D animation from the Simpsons' performance is ridiculous.  It's a PG13 rated movie based on a long-running TV show.  It would be like saying the SouthPark movie revived 2D animation.

    The problems with the math in the Simpsons' catching Rat in 7-10 days statement have already been pointed out.

    Then there's the whole blaming Rat for the studio's less than overwhelming numbers in the quarter.  Rat's promotional costs only became an issue when AWE came up a disappointment at the box office.  It barely passed the first Pirates movie, never mind the 2nd.  If AWE had brought in anything close to the revenue Iger and company had expected it to, they wouldn't be complaining about Rat now.

  • I'm done with this website.

  • I wonder what will be said when Rat wins the Academy Award for animiated feature this year.

    I mean, really....it's GOTTA be the odds on favorite here.  Unless something else stellar is slated for later this year (anyone??)...what's out there for competition? It may even be in the running for best picture, period.

  • Won't spend too much time on explicitly pointing out the "unnecessary hating on Pixar" bit as that is getting redundant and obvious, although I will say that domestically, Pirates 3 has been just as big, if not bigger, disappointment than Ratatouille given its $300 million price tag.  We'll see exactly how it goes after Rat is released world wide, but if both films end up tripling their production costs, I'd be interested to see whether Jim says both films were "disappointments," or if he'll continue to rip only into Ratatouille's totals.

    And as curmudgeon said, what marketing?  Seriously, if that marketing campaign made the company lose money, somebody in marketing needs to be fired.

    Oh, and not to mention coming close to $200 million domestically already beats Jim's earlier estimates of $150M to $170M.

    Anyway, here's just a couple more points to add to what the others have already said here.

    Jim said:

    >>> That said, this new Brad Bird film is still going to wind up earning around $40 million less than "Cars" did. Which (As Doug Mitchelson's question proved) is going to get Wall Street talking.

    (Doug Mitchelson's question:

    "I wanted to see if you felt the Pixar deal is tracking in-line with your acquisition budgets given "Ratatouille," which despite its critical success, is performing domestically a bit below the prior Pixar films. Thanks."  <<<

    First off, if you meant Doug Mitchelson's question will be "proving that Wall Street will be talking NEGATIVELY," I don't see it.  It was a simple question, does Iger think it's on par even though it didn't earn as much as Cars?  Iger said yes and gave his reasons (which seem fine to me).

    How about Motley Fool?  They're Wall Street, right?  Here's their most recent article on the Mouse House:


    And this quote from a Fool:

    "I'm a Disney shareholder, and a very happy one -- it's one of my best-performing holdings over the past year and a half. Iger gets pretty much all of the credit in my book, because he cleaned out a management team and corporate culture in shambles, installing capable leaders and creative visionaries in positions of high responsibility, and letting his new lieutenants loose to do their thing, their way."

    Wall Street seems fine to me.

    What I REALLY want to know is, did they show Bolt's previews in front of Underdog this weekend, or is there still no word about Bolt?  How about Princess and the Frog?  Something interesting like that instead of the same old "Pixar didn't make $7.4 billion dollars with that last movie; that Disney purchase was sooooo bad."  If that's the route to go, why not talk about Disney's purchase of Club Penguin for $350M instead?

  • >Well, to be honest, the folks at Pixar already have their noses significantly out of joint over the fact that "Ratatouille" 's box office still lags behind that of "Shrek the Third."

    This statement suggests that there exists someone in the world who actually thought Ratatouille was going to out-earn Shrek the Third. And there wasn't. So exactly where does this statement come from?

  • It will cement Rat as a strong library title. I think Paprika's the closest competitor but it lacks the clarity of Rat.

    I imagine the Simpsons' "official" budget is on the lower end, but you do have to remember it's been in development almost as long as it's been on the air. It's been a much greater investment of time, money and brand-building- and I have to wonder just how much a windfall it ends up with when you consider that- or do those costs fall inside the tv production budget?

    In terms of Rat merchandise, the Pez dispensers seem to the most common. It looks like the box stores didn't replenish (which means slow sales by the box store standard). I saw the full Mattel line before the movie opened at KB, but since then... it's been traces of it at places like LAX, the Times Square Toys R Us (which seems to stock more due to its size), and Disneyland. I hadn't seen another trace of their animatronic Remy until I hit Disneyland last week and did I snatch that up! :D I do wonder how much of this is Mattel, because they really have distribution issues in the US.

  • I think the bashers here are really missing the point.

    The financial community is quite fickle, and is focused on numbers and numbers alone, specifically revenue and earnings numbers and how they relate to expenses (the notorious "return on investment" or ROI concept).  I do think that the Pixar investment was worth it because it brought a lot of intangibles that Disney had lost in the Eisner era, but the investment community will be very hard on this for years.  Right now they're seeing an overall upswing in Disney, but watch what happens when there's a miss on the earnings sheet.  And the fact that 12 of the 25 analysts have a hold (well, one has a sell - there's one in every crowd) means that that the jury's still out on the company.  I'm optimistic myself on them - I think Iger's doing a good job.

    Rattouille was a great movie, but that's no guarantee of box office success.  And Wall Street wants to see that ROI on each movie go up.  That's all Jim's calling out here.  I've read all these Monday morning articles, and I find his analysis very good on that aspect.  

    (And as for the Pixar folks wanting to beat "Shrek the Third" - that's how it goes - you can have a friendly or unfriendly rivalry with your competition, but it's still a rivalry.  I work for a big organization in the software world that always wants to beat the competition, even when you know it's impossible to do that.  If I worked for Pixar I'd want to beat my competition at the box office, too.  At least they had a way better story and film than "Shrek the Third", even if they didn't get the box office win.)

  • frauen1 - I think you're missing the "bashers'" points (I'm assuming a basher is one who is getting on Jim here for this).

    I understand the business community is fickle, but it's now been multiple articles on the Pixar acquisition being questionable based on their most recent film's numbers - which by the way, will still make the company a <i>profit</i>.  In fact, Pixar has been 8 for 8 in making movies that make a profit, and not just a measly $10 million profit or something, but <i>hundreds</i> of millions - which you would think IS a guarantee of box office success.  

    I have no problem with Jim writing articles that aren't all disneyana and giving bad inside scoop on Pixar, even if it was about Andrew Stanton and Brad Bird getting into a fight or something. That's interesting stuff.  What I do have a problem with is Jim seeming to focus only on the negative when it comes to Pixar numbers over and over again, even after he previously pointed out that the "lowered" expectations for Ratatouille was at around $150M to $170M after the opening weekend; and thus far it's already broken that.  If anything it should show investors the lasting power of the brand which will hopefully translate to WDAS's movies in the near future.

    As this site is a popular source of Disney news, having Jim being so sour on Pixar can spread around the media like wildfire, and who knows, might even affect shareholders' thoughts.  Take the article Jim wrote about a Disney executive hoping for a Pixar backlash:


    This one made the rounds on IMDB and other news sites, but they didn't say Disney "Executives" were hoping Pixar's film would flounder, they made it sound like Disney "Artists."  Since Jim doesn't reveal his sources, we won't know for sure, but for all we know it could be one disgruntled Eisner-era holdover.  Very different from someone like say, Glen Keane.

    So I wouldn't be surprised to see an article like this circulated and shown as "Disney CEO Devastated at Ratatouille's Catastrophic Flop at the Box Office" somewhere on the net.  Why wouldn't a stock holder want to sell after seeing quite a few of those every other week?

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