Finally Nemo comes to rescue Disney and Pixar from troubled waters

There's bound to be something fishy in the quarterly results of The Walt Disney Co and Pixar Animation Studios — the smell of box offic...

There’s bound to be something fishy in the quarterly results of The Walt Disney Co and Pixar Animation Studios — the smell of box office success from underwater tale ‘Finding Nemo’.

Ticket receipts from the film, which may outroar ‘The Lion King’ to become the Number 1 animated film of all time, will help keep Disney’s bottom line firmly above water and send Pixar’s results into the stratosphere, analysts believe. The best is to come in future quarters, when marketing costs will not dent profits. But both companies should get a boost in the June quarter, when the movie had already sold more than $250 million of tickets in the United States, analysts said. One big remaining question is whether Disney and Pixar can work out a new distribution deal to take them beyond 2005.

Many expect Disney to buckle under to terms that would give Pixar the lion’s share of the profit. But analyst Dennis McAlpine said Disney chief executive Michael Eisner had a strong hand to play against Pixar chief executive Steve Jobs. Disney has the foreign marketing machine that arguably let ‘Monsters Inc’ beat DreamWorks’ ‘Shrek’ at the global box office, as well as sequel rights to ‘Monsters’ and ‘Toy Story’. “Who’s got them hostage? Someone called Eisner. This is not a one-sided poker game,” said McAlpine, of McAlpine Associates. “I don’t think it really gets played until next year.”

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While families fill theatres to see ‘Nemo’, Disney has worked hard to fill its parks with promotions such as an unprecedented seven days for the price of four at Walt Disney World for vacations starting this month.

“It is not a dire sign at all,” president and chief operating officer Bob Iger told Reuters recently, referring to discounts at Florida’s Disney World, which is bigger and depends more on out-of-towners than California’s Disneyland.

The theme parks have struggled along with the rest of the travel industry from the threat of terrorism and a weak economy. “In order to stimulate attendance, you have to get more creative in terms of marketing,” Iger said.

Disney has cut costs and jobs at Disney World, but the summer has been mixed. Passenger plane arrivals in Orlando, Florida, in April and May fell about one per cent, while hotel occupancy in the area around Disney World — but not counting Disney hotels — dropped about 2 percentage points in April and 3 percentage points in May before recovering some in June. Disneyland Paris also will withhold royalties to Disney, a move intended to help the park weather the downturn.

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Disney’s media machine, meanwhile, has benefited from strong advertising demand. Executives say they have stopped the haemorrhaging at Number 4 network ABC, but the fall season will prove whether it can gain ground in the ratings race.

Most of Wall Street is neutral on the stock. But there are a number of bulls who see opportunity, including Deutsche Bank’s Doug Mitchelson, who wrote that there was a “terrific buying opportunity” due to concerns over the theme parks. “Disney’s current earnings level is remarkably depressed and likely to recover nicely over the next two years,” he said. (Reuters)