Disney Stinging From 'John Carter' Losses

For some studios, the $200 million loss projected from the movie John Carter might signal the end or at least a massive shakeup. Though the expensive, special-effects-laden movie may go down as the biggest single flop for Walt Disney Co. (NYSE: DIS), some analysts expect the company to take its lumps without too much fuss -- from a certain context.

The $200 million loss would translate into an operating loss of $80 million to $120 million for the studio for the quarter that will end March 31. This is in spite of the $184 million of revenue the movie has generated since its March 9 premiere.

The movie is based on the science fiction writings of Edgar Rice Burroughs and was directed by Finding Nemo director Andrew Stanton. Despite that pedigree, John Carter has not brought in the crowds it needs to turn a profit, given its production costs (which some reports put at more than $250 million) and marketing campaign.

Michael Corty, an analyst with Morningstar, said that even though the news is unfortunate, the diversity of Disney’s operations helps to mitigate some of the pain. “Movies have become a small part of the overall cash flow for the company.” Cable television networks such as ESPN and sales at amusement parks generate nearly three-quarters of Disney’s revenue.

Though the tremendous loss is making headlines, it has not changed his valuation of the company. Corty considered Disney a buy when its shares traded in the low $30s. “Now it is up to [about] $45, which is close to what I think it’s worth.”

Regardless of its heavy use of computer-generated effects, John Carter was outside Disney’s usual fare, he said. “The trend for Disney has been to go with animated and brand-building films. Obviously, this wasn’t one of those.” In recent years, Disney has been known more for movies such WALL-E or Cars from its Pixar Animation Studios. “The core competitive advantage for Disney films is through its animated features.”

John Carter might drive Disney to become choosier about spending money on non-animated movies. “I think this will make them more cautious on those films, but I don’t think it will necessarily hurt them.”

With the increased financial risk in the market, studios in general are being more selective about how many movies they produce annually, he said. And poorly performing movies cannot expect to recoup their losses through DVD and Blu-ray sales, as they might have in previous years. “People still buy DVDs, but it has to be a really popular film. In the past, a movie would still sell a couple of million DVDs.”

Though John Carter dampened its quarter, Disney has given no indication of retreat from the live-action market. It plans to distribute the superhero team-up movie The Avengers (due in May) and other features from Marvel Studios.

That does not mean the House That Mickey Built is nonchalant about losing money at the box office. “The goal for all studios is to come up with hit movies you can create a franchise with,” Corty said.

Odds are John Carter is not going to be one of them.