A Nose for Profit : ‘Pinocchio’ Release to Test Truth of Video Sales Theory


In a summertime ritual, Walt Disney Co. is readying another animated classic for re-release in theaters, 7 1/2 years after the movie’s last appearance on a marquee. “Pinocchio,” the 1940 film, has been spiffed up by a restoration team for its seventh outing on June 26.

But Disney executives will be looking closely at the film for other reasons. “Pinocchio” is the first Disney animated feature to return to theaters after release on videocassette. Disney wants to know what impact the videos will have on the box-office performance of the film, which grossed $26.5 million in its last theatrical run during the 1984 holiday season. Will the Pinocchio videos diminish the public’s willingness to pay box-office prices in 1992?

A number of Disney analysts believe not. For starters, only 700,000 units of “Pinocchio” were sold in the 1985-1986 period, in contrast with the 14.2 million copies of “Fantasia” purchased last winter.

The Pinocchio videocassettes went out “before the marketplace really got developed,” said Lisbeth R. Barron, an analyst with S. G. Warburg & Co. in New York. “I don’t think this is a true test.”


Still, “Pinocchio” illustrates the shrewd way Disney continues to exploit its animated film franchise, which probably contributes the lion’s share of earnings for Disney’s filmed entertainment segment year in, year out.

No audience appreciates the Disney animated films more than Wall Street. With the production costs already recouped, the older films quickly turn a profit. Even the marketing costs are lower, because the public already knows the title and story line for classics such as “Cinderella” and “Sleeping Beauty.”

And when the classics are sold as videos, Disney keeps an estimated 60% of the wholesale price as profit, providing a phenomenal boost to the company’s earnings. Since Disney controls the timing of the classic films’ release on video, it “helps them smooth earnings, whereas (other) films are always unpredictable,” Barron said.

So, unlike the yo-yo earnings of most film studios, Disney has managed to show a steady increase in its filmed entertainment operating income for each year since the Michael Eisner-led management team took charge. Beginning in 1985 with $33.6 million, the unit’s operating income rose to $318.1 million for the year ended Sept. 30, 1991.

David Londoner, a managing director of Wertheim Schroder, said flatly: “Disney will make more than $100 million more (this year) than any other film company has ever made in any year in history--a lot of it from ‘Fantasia,’ ‘101 Dalmatians’ and ‘Beauty and the Beast.’ ”

Against that backdrop, it’s easy to see why the Disney hierarchy is lavishing care on the 52-year-old “Pinocchio,” the story of a puppet that comes to life. In addition to the film’s restoration, Disney has timed its summer release so that “Pinocchio” will face no competition from other studios for the family audience.


Disney also expects to benefit from the good will built up with audiences from its more recent animated hits, “Little Mermaid” and “Beauty and the Beast.”

“What’s happening is a real resurgence in animation as an art form,” said Dick Cook, president of Disney’s film distribution arm. “There is a true rekindling of interest. It’s not for just kids anymore.”

Eisner, the Disney chairman, went even further: “I think that (the) film release of this ‘Pinocchio’ will be substantially higher than what we did in ‘84-’85 . . . because of the interest in animation, and the videos, which (are) really no more than advertising for these movies.”

Cynics might turn Eisner’s statement around, since the theatrical re-release of “101 Dalmatians” last summer clearly paved the way for the more profitable release of the film on video this spring. With 11 million cassettes shipped, Disney’s revenue from home video (an estimated $150 million) far exceeded its share (about $32 million) of the film’s box-office revenue.

Still, Eisner said the company hasn’t decided whether it will re-release “Pinocchio” on video next year. “There’s an emotional issue here. We want to make sure that we still have a library where parents want to go out and have a shared experience with their children in the theater.”

And Disney, for now, has the luxury of keeping such money-makers off the market. With the production of “Little Mermaid,” “Beauty and the Beast” and other new animated films, Disney is stretching out the re-release of older films to nine or 10 years, as opposed to the traditional seven-year rotation. In Europe, Disney has already adopted a 10-year cycle for the re-release of its animated classics.


So much, then, for the criticism that Eisner and his people would plunder the Disney library. “Lady and the Tramp,” which sold 3.5 million videos in 1987, may not be back in the theaters until 1995. By then, Disney is banking on normal wear-and-tear on the tapes, and a new generation of children or new parents shelling out money at the box office window.

‘Pinocchio’s’ Trail

“Pinocchio” is the first Walt Disney Co. animated feature to return to theaters since being released on videocassette. It was released in 1985-86 before casette sales escalated. Disney wants to know what impact video sales will have on box-office performance.

Millions of units sold

‘Fantasia’: 14.2

‘101 Dalmatians’: 11.1

‘Bambi’: 10.6

‘The Little Mermaid’: 9.6

‘Who Framed Roger Rabbit’: 8.5

‘Pinocchio’: 0.7

Source: Video Store Magazine