Disney Update

Tuesday, February 5, 2008

Disney
Walt Disney Co
DIS

30.398 -0.502 -1.62%
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[DIS 30.398 -0.502 (-1.62%) ] broke all records with its limited release 3-D movie "Hannah Montana & Miley Cyrus: Best of Both Worlds Concert (3-D)." And the film's huge profit margin proves that CEO Bob Iger's strategy--building brands to exploit across the company's many platforms--really works.

Just like the "High School Musical" phenomenon, it all starts on the Disney Channel, where Hannah Montana is a popular show about a teen pop star. This weekend a 3-D concert film starring the starlet debuted on just 683 theaters, but managed to bring in $31.1 million dollars, the fewest number of theaters to ever open at number one. It had the highest per-screen average of any wide release in history--$42,500--beating the likes of "Spider Man 3." And the biggest opening gross over Super Bowl weekend ever.

Disney was very strategic: the movie debut's follows on the heels of a live tour, and the concert film is set to run for just two weeks, though exhibitors are bound to ask to request longer runs. And the fact that it only plays on 3D means that you HAVE to go to a theater, you can't get the same experience from a DVD a few months later at home. AND, 3D theaters charge more--the average ticket is $16 compared to the nationwide average ticket price of under $7 for a 2D ticket.

This strategy guarantees you're not wasting huge amounts of money on a giant budget that could flop at the box office, and because the fan base is already established, you don't have to spend a fortune on marketing. Also, there's the merchandise factor. How many tween girls begged their parents for more Hannah Montana-branded stuff? A lot.

Disney earnings are today and all eyes are on its cable networks' business and whether ESPN and Disney Channel (bolstered by the likes of Montana and High School Musical) can keep up their impressive growth. Investors are also going to be scrutinizing the parks business, anxious to see whether the consumer slowdown hurt revenue. And then of course there's the movie business.