'John Carter' Will Cost Disney $200 Million in Operating Losses

2012-11 REP John Carter Taylor Kitsch H

The sci-fi epic starring Taylor Kitsch cost $300 million to make and market but fell flat at the box office.

As a result of the catastrophic performance of the Mars-set action film, the studio should lose as much as $120 million in the quarter.

John Carter is officially a money-wasting debacle, and to a degree that exceeds most of Wall Street's predictions.

Disney announced Monday its intentions to write down $200 million as a result of the box-office dud about a Civil War-era soldier who finds himself inexplicably transported to the planet Mars and having to battle a variety of space aliens.

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Analysts have known since John Carter's $30 million domestic opening weekend that the movie, with a production budget of $275 million and another $100 million spent on marketing, would cause a large write-down for Disney, though most estimates were about $150 million, with at least one as high as $165 million.

As a result of the hefty $200 million charge, during the period ending March 31 -- Disney's second fiscal quarter -- the studio segment will post a loss of $80 million-$120 million, the company said. During the same quarter a year ago, Disney reported operating profit of $77 million.

John Carter makes it four consecutive years that Disney has had to take a large write-down because of a poor performing movie, following Mars Needs Moms, Prince of Persia: The Sands of Time and The Sorcerer's Apprentice.

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As far as the blame-game goes, the fact that studio write-downs have not been uncommon of late should work in the favor of chairman Rich Ross, who took the helm of the studio only two-and-a-half years ago, after John Carter had already been greenlighted by his predecessor, Dick Cook.

Besides Ross and Cook, former marketing chief MT Carney, who left Disney three months ago, also bears responsibility for the financial havoc wrought by John Carter, as does Andrew Stanton, the film's director who, up until now, had a stellar reputation as the moviemaking genius behind Pixar hits WALL-E and Finding Nemo.

"In light of the theatrical performance of John Carter ($184 million global box office), we expect the film to generate an operating loss of approximately $200 million during our second fiscal quarter ending March 31," Disney said Monday. " As a result, our current expectation is that the studio segment will have an operating loss of between $80 [million] and $120 million for the second quarter."

Said Wunderlich Securities analyst Matthew Harrigan in a first reaction: "The writing was pretty much on the wall as international was off a good bit this weekend. That was the only saving grace on opening weekend."

He had expected a $150 million-plus loss after the second box-office weekend and previously estimated that the studio would be slightly profitable in the current quarter.  

Miller Tabak analyst David Joyce also said that the financial hit was  "a bit worse than we expected."  

He had taken his studio entertainment operating loss estimate for the current quarter to $37 million before the company's guidance Monday afternoon.

"At this new guidance midpoint, that might only hit our quarterly earnings per share estimate by about an incremental 2 cents," Joyce said. 

Evercore Partners analyst Alan Gould said in an interview: "I think my $165 million loss estimate, which was probably the most negative on the Street, underestimated the amount of P&A the company eventually spent. I am a bit surprised, though, that the division will post an $80 million-$120 million loss for the quarter. Taking the midpoint, I would have anticipated the rest of the studio business to have generated more than a $100 million profit."

Disney's statement, released Monday after the closing bell on Wall Street, wasn't entirely dire: It did express confidence in the studio's May and June releases.

"As we look forward to the second half of the year, we are excited about the upcoming releases of The Avengers and Brave, which we believe have tremendous potential to drive value for the studio and the rest of the company."

Disney shares rose 25 cents on Monday to $43.44 and were down 1 percent during the after-hours session.

Georg Szalai contributed to this report.