Some analysts were surprised that Walt Disney Co. (DIS) shares increased Monday, based upon a slower opening than expected for "Ratatouille."
They deduced from the $47 million take that animated feature films are now past their prime. Most estimates for the film were between $50 to $60 million for the weekend.
Bear Stearns analyst Spencer Wang said "This is another sign of our long-held thesis that CG (computer-generated) animation has passed its peak given increased competitive output, which has saturated the market, fragmented market share, and may be driving up costs. As a result, we still think returns in CG will remain under pressure."
This seems to be a knee jerk reaction in my estimation. In the example of Wang, he had projected a $50 million opener for the Disney film. It was three million dollars short and so now the animated, computer-generated industry is in trouble? That's a stretch to say the least.
The other problem with that assumption is family-based animated films usually have a much longer draw than their theater counterparts. They normally last longer and drop gradually, rather than plunge. With Transformers coming, it could make their second weekend drop more than normal.
But this is probably the most unusual summer in box office history in the number of potential blockbusters being released. That has caused many of the films to eat into each others profits. Also in a lot of the cases, the films just weren't as good as their predecessors.
This doesn't mean that there won't be failures in the animated film industry, there already have been. They have to be written and executed great to be a hit, just like any other picture.
I do believe that moviegoers are more discerning now, and the storyline is becoming an increasingly important part of the mix. In the past the introduction of the quality graphics mesmorized people into going to a movie just to see what they looked like. That has probably passed its prime.
As far as how it affects Disney, it's still far too soon to tell. You just don't look at proceeds from theaters as the means of deciding on its success, you also have to take in licensed retail sales of the characters in the show, something that has been performing well for Disney and is projected to do even better by the company.
The other thing that makes it less of an impact to me is Disney's decision to cut back on how many movies they make for the year, which means it's becoming a smaller part of their income. No matter what happens with Ratatouille, I don't think it really matters that much to Disney's bottom line.
Before it's over, it will probably outperform what people think it'll do because I don't think they're including the longevity factor of these types of movies.
It seems that Disney has set themselves up more for the digital age and is relying less on movies for profits. That and the strong, healthy outlook for licensing their characters to retail outlets makes it matter less how strong their movies perform.
They need to perform good, not great, to be what the company needs them to be.
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