Disney Shifting Its Movie Focus to Family Fare

Walt Disney Co., which generated the highest box-office returns of any studio last year, is fundamentally reshaping both the creative and financial direction of its live-action movie business.

The company is seeking to substantially increase the number of Disney-branded family movies it produces and simultaneously cut its overall investment in films by more than one-third.

Disney Chairman Michael Eisner and studio chief Joe Roth said the shift is a recognition of the brutal economics of the movie business and of Disney’s competitive advantage as the only Hollywood studio with a brand name in mainstream family entertainment.

Last year, the ratio of live-action to family movie investment by the media giant was roughly 4 to 1 in favor of non-Disney-brand adult fare such as “Armageddon” and “The Horse Whisperer.” This year, it’s about 2 to 1, and Roth said the target is closer to 1 to 1. The company plans no strategic changes in its powerhouse animation business.

In order to manage its costs in the live-action adult business, Disney is going to follow the example of several other Hollywood studios, notably Paramount, by seeking financial partners for most of its high-cost productions and gambling only rarely on the big bets.

The studio’s 1999 movie slate sharply illustrates the rethinking of a strategy that had in recent years increasingly relied on bigger-budget star vehicles to deliver hits. This year’s output will include more Disney-branded family films than ever before--seven out of 20--with fewer live-action adult films, lower average investment and more modest casting and content of those offerings.

“We’re going to be more cautious and conservative,” said Eisner, who was unusually blunt in a recent letter to shareholders about his displeasure over the cost and performance of the studio’s live-action films during fiscal 1998, which ended Sept. 30.

This year, Disney will spend about $600 million less than the $1.5 billion it invested last year on overhead, development, production, marketing and distribution of its live-action movies.

“We’ve brought hundreds of millions of dollars out of the investment we’re making in non-Disney movies,” said Rob Moore, executive vice president and chief financial officer of Disney Studios. “The non-Disney slate has been turned on its head and has a much different make-up . . . and is the model we plan on having . . . for the year 2000.”

Some of Disney’s savings come from consolidating two production units into one under production President David Vogel and from shedding more than half of the studio’s overall producer deals. The retrenchment also reflects less spending on developing movie scripts and other underlying material.

Disney also will spend less on production this year compared with last, when it had more than half a dozen big-budget films such as “Armageddon” (more than $150 million); “Enemy of the State” (about $100 million); “Mighty Joe Young” (about $90 million); “The Horse Whisperer” ($75 million); “Six Days, Seven Nights” ($75 million); “Beloved” (more than $60 million); and “Holy Man” (more than $60 million).

This year’s movie slate has a wider budget range with more modest and mid-range comedies, among them “Rushmore” and “Ten Things I Hate About You,” both costing less than $15 million; Spike Lee’s drama “Summer of Sam,” in the $20-million range; and Garry Marshall’s romantic comedy “The Other Sister,” in the neighborhood of $30 million.

Roth estimates that Disney’s average investment this year per live-action movie--family or adult--will be $32 million, well below the industry average of $52 million.

The biggest contributing factor is that Disney is sharing the financial risk on its higher-cost adult movies, whereas last year it self-financed 100% of its big endeavors and logged losses of more than $50 million each on box-office duds “Beloved” and “Holy Man.” The studio also stands to lose $30 million or more on “Mighty Joe Young.”

This year, Disney expects to partner with Sony Pictures on its big Christmas release “Bicentennial Man,” a $100-million Robin Williams vehicle. And with Spyglass Entertainment, it is co-financing two films with a combined cost of about $130 million: “Instinct,” starring Anthony Hopkins and Cuba Gooding Jr., and “The Sixth Sense,” a psychological thriller with Bruce Willis.

Disney also sold off most foreign rights to its $70-million film “The 13th Warrior,” an adventure thriller based on Michael Crichton’s best-selling novel, limiting its investment to about $50 million.

Roth said that on its live-action adult movies, “We won’t be exposed for more than $50 million on any picture. . . . It’s so difficult to make a lot of money on pictures, you’re better off protecting yourself.”

Roth said the exception will be Jerry Bruckheimer-produced pictures, which include such profitable hits as “Armageddon,” “Con Air” and “The Rock.” Despite having the No. 1 domestic market share and highest box-office gross of any studio last year ($1.1 billion) with five films grossing $100 million or more, including “The Waterboy,” which cost $23 million and has grossed $155.5 million to date, profit didn’t match expectations.

In his shareholders letter, Eisner said, “In an effort to improve our odds for continued success in the live-action film business, we are implementing a strategy that calls for the making of a higher percentage of Disney-labeled films.”

In an interview, Eisner told The Times, “It’s not that we’ve done a bad job in this area, we just have to keep reminding ourselves how important it is to have a creative emphasis on the Disney brand.”

The recent reorganization of Disney Studios, which brought the company’s cash cow, feature animation, and its chief executive, Peter Schneider, under Roth, underscores Disney’s aim to focus more on its brand.

“We know what the Disney name means in theatrical and home video,” said Roth, noting that in 1998 Disney commanded six of the top seven best-selling video titles, among them “Lion King II: Simba’s Pride,” “The Little Mermaid,” “Peter Pan” and “Hercules.”

Nearly two years ago, Roth began talking about the importance of making more Disney family franchise films such as the live-action version of “101 Dalmatians,” which reaped the studio more than $500 million in total earnings from all revenue streams. A wide-appeal family movie like “101” has far greater value to Disney than a big action movie--even a huge hit like “Armageddon,” which has grossed more than $520 million worldwide.

A hit Disney family movie, whether it is the animated “The Lion King” or live-action “101 Dalmatians,” has huge potential in sell-through video and merchandising, generating hundreds of millions of dollars beyond the box office and enhancing the brand with everything from T-shirts to lunch boxes.

Moreover, the family product feeds all of Disney’s distribution channels, from its Saturday morning cartoon schedule and ABC’s “Wonderful World of Disney” to the Disney Channel and its direct-to-video and theme park businesses.

This year, Disney will release seven family films: the animated “Tarzan,” “Toy Story 2” and “Fantasia 2000,” and the live-action “My Favorite Martian,” “Inspector Gadget,” “The First Doug Movie Ever” and “Whispers” (about a baby elephant).

Those movies can be costly. “Mighty Joe Young” cost nearly $90 million (before marketing); “Flubber,” which starred Robin Williams, cost $75 million; “101” cost close to $70 million; and the big animated movies now cost more than $100 million each.

Even so, Disney executives say they’re better off with a family- brand movie--even an underperformer such as “Mighty Joe Young”--since the potential ancillary value is far greater than for duds like “Holy Man” and “Beloved,” which have little life beyond the box office.

Moore said that even a moderate success such as “The Parent Trap,” which cost $55 million and grossed $60 million in the U.S., can sell more than 5 million videocassettes, which yield Disney more than $50 million.

“You can’t lose as much on the family movies, and you can do a great deal more,” Roth said.

“Family movies are hard to make,” said Eisner. “Movies like ‘E.T.,’ ‘Mary Poppins’ and ‘101 Dalmatians’ are not gimmicks and they’re not great action adventures. And you don’t want to be super-sophisticated or too violent or too gratuitously sexual.”

Schneider warned that studios can’t create or manufacture “event” family movies, but rather, “you have to have good movies that become events.”

He suggests there are three fundamental elements to a successful Disney entertainment product: “Tell a great story, have great characters and push the boundaries of that medium one step further--as Walt Disney said about animation,” said Schneider, who’s played a key role in reinvigorating Disney’s feature animation business and transforming animated movies such as “The Lion King” and “Beauty and the Beast” into Broadway musicals.