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

Jim Hill

18 years ago

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

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.

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.

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.

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.”

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.”

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?