Disney's (NYSE:DIS) Captain America: The Winter Soldier topped the box office in its opening weekend, grossing over $95 million in North America.  This is better than Thor 2‘s opening weekend, which garnered around $86 million. The movie marks the top April opening of all time, beating the previous record for the month by Fast Five in 2011. So far, the movie has grossed more than $302 million at the global box office.  Last month, it was confirmed that the unit will return to direct a third installment of Captain America, scheduled to be released on May 6, 2016.  We wonder if Disney can continue to ride high over the success of its movies this year, as it did in 2013. While Disney has had many popular movie titles such as Pirates Of The Caribbean, The Cars, Frozen and Toy Story, the performance of its studio division can be erratic as it largely depends on the audience and box office response, which can be fickle and hard to anticipate.
Studio Business On Track
Disney has added to its movie-making assets through a series of acquisitions, including the $7.4 billion purchase of Pixar, maker of Cars and Toy Story in 2006.  It added Marvel in 2009 at a cost of $4.2 billion and last year it added Lucasfilm, maker of the Star Wars films, in a deal valued at $4.1 billion.  Star Wars has a huge fan following and it shouldn’t be difficult for Disney to repeat the success of Marvel and Pixar with Lucasfilm. Earlier last week, Disney said it has already started shooting Episode VII of the nine-part Star Wars series, with release slated toward the end of 2015. 
The studio business contributes close to 9% to Disney’s value, according to our estimates. While it accounts for close to 14% to overall revenues, it hardly contributes 6% to the company’s reported EBITDA. This low value contribution can be attributed to higher marketing costs for the business. For instance, Disney reportedly has paid as high as $4 million per 30-second spot for the first televised advertisement of Captain America: The Winter Soldier aired during Super Bowl XLVIII on February 2, 2014. 
During the first quarter of calendar year 2014, Disney released the movie Need For Speed, which was also successful at the box office. The movie cost a modest $66 million to produce and has so far grossed more than $184 million worldwide.  Disney will see the benefits of Need For Speed in the March quarter results along with continued benefits from Frozen and Thor 2. However, Captain America benefits will be seen only in the quarter ending June 2014.
Disney had a fantastic run at the box office in 2013 and the studio generated revenues in excess of $6.3 billion. The studio has a solid lineup for the next few years, especially 2015 when the much awaited Star Wars Episode VII and Avengers: Age Of Ultron will be released. We estimate the studio’s revenues to be northward of $7 billion in 2015 and over $8 billion by the end of our forecast period.
- Captain America: The Winter Soldier, Box Office Mojo
- Screenwriters Christopher Markus and Stephen McFeely Talk CAPTAIN AMERICA 3; Reveal They’ve Been Working on it Since Late 2013, Collider, Apr 7, 2014
- Disney’s SEC Filings
- Disney Chief Reveals ‘Star Wars:Episode VII’ Has Begun Shooting, Cast Nearly Complete, Huffington Post, Apr 6, 2014
- Super Bowl: Disney Seeking Last-Minute Ad Buy, The Hollywood Reporter, Jan 22, 2014
- Need For Speed, Box Office Mojo
Disclosure: No positions