For the past decade, Disney has been the Teflon movie studio, remarkably adept at withstanding the tectonic changes impacting the film industry, and well fortified by its arsenal of key properties …
There are other issues bedeviling the Magic Kingdom these days. Because of its all-tentpole, all-the-time strategy, Disney’s movies each require production budgets of at least $200 million — plus marketing costs of roughly $100 million. That means the studio’s films have a higher benchmark than its rivals to break even at the box office. In the past, those budgets were justified with movies that crossed $1 billion worldwide with ease.
The problem is that getting these costs under control will take time. Major movies take at least three to four years to develop, produce and distribute — a lifetime in a fast-changing industry. Even if Disney is serious about tightening its belt, it may not make a noticeable difference until 2026 or beyond.
“If you cut costs, do you degrade the quality of the product?” says Brandon Nispel, an equity research analyst with KeyBanc Capital Markets. “If you spend less, do people like the movies you are making less? And how much and how fast can you start cutting?” “People have become conditioned to expect that things will quickly appear on Disney+,” says Neil Macker, a senior equity analyst for Morningstar Research Services. “The theatrical movie business has been in decline for awhile and the pandemic accelerated that.”
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