4.05 billion dollars worth it?

[disneydad78]

I love Star Wars and Lucas films. 4.05 billion ? Maybe thats why Disney had a LARGE increase in the cost of things over the last several years.

Can anyone help shead some light on why that 4.05 billion dollar investment was a good one for Disney. Not looking to be flamed on, I just dont understand why. Why tell the public due to rising cost of "x" we have to raise the prices on everything by "x" and then go buy Lucas films for 4.05 billion. He has been riding Star Wars and Indian Jones forever. Nothing really new or cutting edge in years. Now I love me some Star Wars and Indian Jones so dont yell at me, IM a fan. Just 4.05 billion and my dang turkey leg cost me $$$$$ (can you hear the cash register in the background, KA-CHING!)

I know Disney had some coin in the bank, but DANG. Help a brother out and let me bring my kids to WDW more often, without having to take a loan out to pay for it.

and yes , we ARE going back this Dec. MAN I love that place! Maybe Pete, Kevin, Corey will ride the new Test Track with me!!!HEY HEY!!! just PM me guys! GEAUX TIGERS!

 

[Cheshire Figment]

1. Six current SW films.

2. When they bring out episodes 7, 8, and 9 not only will they get the new episodes, but there will be reuns of the older ones.

3. Industrial Light and Magic.Which dos congtract work for other studioc.

4. Indiana Jones. True that the current films are under contract to a different distribution company, but that will not affct any new films.

5. Merchandise.

 

[davedmaine]

Disney is a public company. Its main objective is to make money for shareholders, not to be a budget vacation spot.
They charge what they charge at the parks because they can -- people pay it. This Star Wars investment will pay for itself many times over. The first film will likely do over a billion dollars internationally.

 

[AndyPok1]

Simple. They'll make the money back within the decade, and then some on top of it.

They bough Marvel for the same amount almost exactly 3 years ago, and that is paying off. They bought Pixar 3 years before that for 7 billion, and that is paying off. Saying that they're going to release new Star Wars movies... The last 3 films made 2.5 billion at the box office alone. Obviously that isn't all profit, but when you add in merchandising and dvd/blu-ray sales after the fact, they'll have made the 4 billion back before you realize it.

It's an investment.

 

[disneydad78]

But my turkey leg $$$$$$

 

[AndyPok1]

But my turkey leg $$$$$$

I realize it is in jest, but I want to say it anyway for the general populous.

TWDC is made up of 5 divisions:

Media (ABC/ESPN etc)
WDPR (WDW/DCL etc)
Studios (Films)
Consumer Products (Merchandising)
Interactive Media (Video Games)

Last fiscal year, of the 3.5billion of investments, 2.7 went to WDPR. This is standard. In the previous year, of 2.1B, 1.5 went to WDPR. Year before... 1.7 and 1.2.

So typically WDPR gets significantly over 60% of the capital expenditure budget, while only bringing in 20-30% of the revenue.

Investments like this allow them to keep expanding WDPR while not charging EVEN MORE $$$$$. If they didn't do things like buy Cap City (ABC/ESPN), Pixar, Marvel, LucasFilms... WDPR would never be able to expand.

 

[OKW Lover]

I think the OP is missing a very important part of the equation. Its not that Disney is going to spend more money now, they are getting a huge revenue stream as well.

Look at LucasFilms separately. Its not a money losing operation. Folding it into the Disney Corporation will not result in them losing money.

 

[chalee94]

But my turkey leg $$$$$$

pretty sure the marvel and star wars franchises will pay for themselves but they do need your turkey leg money to pay for the fantasy land expansion...

 

[Stacy's a freak]

I can understand the question because my first thought is - how will this new investment affect the parks? But then I remember that the parks are just one part (and probably a smaller part) of the entire company. Disney is a company that has diversified to stay profitable. So this new investment may not affect the parks at all. Not only does this acquisition give them movie rights, it gives them the ridiculously profitable merchandising. You can't turn on the TV without seeing a Star Wars game, action figures, lego sets, etc. Now if Disney could acquire Lego, they would be unstoppable!

This conversation makes me wonder about the breakdown. Do we know what facet of their business makes the most money? I would be curious to know.

 

[OKW Lover]

This conversation makes me wonder about the breakdown. Do we know what facet of their business makes the most money? I would be curious to know.

The Walt Disney Company is a publicly traded corporation and as such files regular financial statements with the SEC. Over the years the segment that makes the most money changes from year-to-year according to economic conditions, calendar events (timing of holidays), and movie blockbuster (or epic failure) results.

So, there really isn't one simple answer to this question.

 

[jcb]

This conversation makes me wonder about the breakdown. Do we know what facet of their business makes the most money? I would be curious to know.

As Jeff said, this is complicated and varies from FY to FY. Disney hasn't yet released 2012 final numbers (they are to be released 11/8/12). Here are the segment revenues and "operating income" (essentially net revenue) for 2011 and 2010 (these amounts are in millions of dollars).

Media networks include ESPN, ABC and Disney Channels. (This helps explains why Disney featured High School Musical ad nauseum in the theme parks.)

The full report for 2011 is at http://thewaltdisneycompany.com/sites/default/files/reports/q4-fy11-earnings.pdf

More reports are available at http://thewaltdisneycompany.com/investors/financial-information

I think one of the factors behind acquisition of Lucasfilm has to be the volatility in Disney's studio segment (i.e., it still baffles me Disney could turn John Carter into a screenplay and marketing disaster).

 

[AndyPok1]

Ya. That report is where I got my numbers from in the post above.

Like everyone says, it can vary from year to year, but typically you can bet on the following things:

1) ESPN will be a cash cow
2) WDPR will get a ton of investment.
3) Video Games will lose money.

 

[DisLUV]

Disneydad78, I just want to say hello from Ponchatoula, LA!!

 

[skier_pete]

Star Wars is an evergreen property. One of the few out there, along with the Disney back catalog. I say this because the property gets re-sold to generation after generation and in format after format. Lucasfilm came out with the Blu-Ray box last year and made $84 million the first WEEK. The Phantom Menace, widely considered the crappiest of the movies, came out in 3-D and made $43 million domestic and $59 million more internationally. How much do you think one people actually LIKE will make. Last year star wars toys were a $250 million business.

And that doesn't even account for the new films, which will likely cost around $200 million to make. (No need to pay for "movie stars" so the budget can be kept reasonable, unlike Johnny Depp getting $50 million for Pirates 4.) Even with marketing costs at another $200 million, they are likely to minimally make $1 billion worldwide BO. A cool $600 million in profit, not to mention added home media revenue.

And then lets talk about the parks. Everybody's been saying "What's Disney's answer to Harry Potter?" Well, they answered in the most effective possible way. An expanded Star Wars land gives them true straight up competition with Harry Potter. And Star Wars has something that Harry Potter doesn't: continuous new content. If JK Rowling doesn't let someone add to the Harry Potter mythos, in 10 years it is very unlikely that Harry Potter will still be as popular as it is today, whereas Star Wars will likely have hooked yet another generation of fans. In addition to that, there's also the money they are now NO LONGER paying Lucasfilm for Star Tours / Jedi Academy / Star Wars Weekends / Indiana Jones which you can bet was in the 10s of millions year.

Star Wars is like Snow White and Cinderella, they're gonna keep on giving to the company bottom line. So, $4 billion sounds like a lot (and it isn't really $4 billion, as half of it is in newly minted stock, not the same as cash), but they will likely make that back 2 to 3-fold over the next 10 years.

It's funny that Eisner was able to take a struggling entertainment company and turn it into a major entertainment company, but Iger seems to have gone and turned Disney into THE entertainment company.

 

[KKDonaldFan]

Just to throw another idea out there, I believe Lucas had been toying with the idea of a TV live-action series set between the events of Ep. 3 and Ep. 4.

http://en.wikipedia.org/wiki/Star_Wars_live-action_TV_series

With Disney owning ABC, it could be a possibility that it could actually get developed.

 

[timmac]

I can understand the question because my first thought is - how will this new investment affect the parks? But then I remember that the parks are just one part (and probably a smaller part) of the entire company.

This is a really important, key observation, that unfortunately, a lot of Disney fans completely overlook.

In my opinion, I've already seen way too much commentary along the lines of "Why did they spend $4 billion on this, but instead of invest it in the parks", "If they can afford this, why are ticket prices going up", etc. A few years ago with the purchase of Marvel, there was a lot of the same (rather naive) grumbling.