Analyst: Disney's 'John Carter' Write-Down 'May Not Be as Bad as Feared'
NEW YORK - Most on Wall Street expect Walt Disney to take a large write-down on big-budget sci-fi adventure John Carter, which opened with global box office revenue of slightly more than $100 million this past weekend.
Analysts previously surveyed by THR have mostly predicted a $100 million-$150 million write-down. But Janney Montgomery Scott's Tony Wible suggested on Wednesday that things could well play out better for Disney.
"We have been tracking each of Disney's films since 2005 in our film database, which helps us analyze the potential fallout from John Carter," he wrote in an investor note. "While the Street is anticipating a large impairment on the film, our analysis shows that the impairment may not be as bad as feared if the film tracks in line with average performance ratios seen in 2011."
Wible's average-case scenario would lead to only a $53 million loss, while his best-case scenario actually shows a $53 million profit. He does, however, see a possible $180 million write-down in his worst-case scenario. "The best case is improbable," Wible acknowledged. "However, our median case is not a stretch and would be an upside to expectations."
He suggested though that the size of the write-down may not matter much as he signaled hope for a better film performance from Disney in the future. “The film is part of Disney’s legacy studio management and does not reflect the company's current shift to a leaner more profitable film slate,” he said.
Here is Wible's math for John Carter: The film opened to around $30 million in the U.S. and $70 million abroad. "On average, Disney has seen its U.S. box office ultimate at 3.2 times its opening weekend, which implies the film is on track to do $95 million," the analyst said. "If the film sustains its current 30:70 split on U.S./international, we would see global box office of $318 million, which would net Disney $132 million in revenue."
Assuming that the film tracks at a discount to the average DVD-to-box office ratio for Disney (at 0.45 times versus its 0.55 times average), Disney could also collect $143 million in the home entertainment window, Wible added. Plus, global TV sales could add another $48 million in revenue, bringing the total to a $322 million revenue ultimate.
"Netting out $125 million in [prints and advertising] and a $250 million negative cost suggests the film would lose $53 million over its life, which is better than bearish expectations," Wible concluded.