Disney Hoping for a Happy Ending to 2004

It’s a long way from the ticket line to the bottom line.

That’s the case for Walt Disney Co., whose feature-film division has had a rocky first half of the year after setting industry records in 2003. The latest disappointment came with the premiere of “King Arthur,” the $120-million summer action movie from producer Jerry Bruckheimer. It was in third place Sunday -- behind “Spider-Man 2” and “Anchorman: The Legend of Ron Burgundy” -- with an estimated ticket take of $15.2 million over the weekend and $23.6 million since it opened Wednesday, according to Disney.

With that kind of start, there’s little chance that “King Arthur” will live up to the success of Bruckheimer’s last summer movie for Disney, “Pirates of the Caribbean: The Curse of the Black Pearl.” And the studio, No. 1 at the box office last year, is in sixth place now, tracking firm Nielsen EDI said.

But Disney nevertheless may meet projections that its earnings will grow this year by 50% or more. Even as the studio sputters, the company is firing away on other cylinders, giving Chief Executive Michael Eisner breathing room as he seeks to shore up investors’ faith in the Burbank-based entertainment company. And executives expect the film division itself to have better results in the second half of the year.

Underscoring his confidence in Disney’s outlook, Eisner said Friday that management probably would recommended a dividend increase for shareholders this year.

Disney shares rose 25 cents Friday to $24.60 on the New York Stock Exchange.

There have been gains across various businesses, including theme parks, which are recovering from a three-year slump. Home-video sales of last year’s box office hits have been solid, and a strong advertising market has helped Disney’s owner-operated TV stations. Operating income in the cable TV group, which includes the ESPN sports powerhouse and the Disney Channel, is expected to grow 20% in the third fiscal quarter.

All that gives the company a cushion to absorb financial hits elsewhere in the empire, notably at the struggling ABC-TV network and the studio.

“Disney, like other media conglomerates, benefits from having a diverse portfolio of businesses where potential risks and losses from one area can be offset by gains in another division,” said Tim Wallace, managing director of investment research for UBS Securities.

That doesn’t mean Disney is off the hook when it comes to box office returns. Many investors are particularly concerned about the spotty record of the animation division. Their anxieties were heightened this year after Pixar Animation Studios, creator of the successful “Toy Story” franchise and the blockbuster “Finding Nemo,” ended talks to extend its longtime lucrative partnership with Disney.

Box office duds in the second half of the year could undercut Eisner’s argument that Disney’s worst days are behind it and provide more fuel to his fiercest critics, Roy E. Disney and Stanley P. Gold. The former Disney board members led a campaign against Eisner that culminated in a 45% protest vote against his reelection to the board in March. Eisner subsequently gave up his chairman’s title.

“While poor performance may not undermine management’s expectations, it could have an impact on investor sentiment about the company,” Wallace said. “The studio has to come up with decent films this year.”

Disney faces a tough time living up to its performance in 2003. The smash hits “Pirates” and “Finding Nemo” each amassed more than $300 million in ticket sales in the U.S. alone.

By this time last year, three Disney films had opened in the $30-million-plus range. In fact, the combined box office openings of all of its movies so far this year total less than what “Pirates” made in its first two weeks.

This year, the lackluster performers or outright flops include “Hidalgo,” the historical epic “Alamo” and the animated barnyard tale “Home on the Range.” Disney was forced to take write-downs for the latter two.

A more recent letdown has been “Around the World in 80 Days.” The remake cost more than $110 million but took in only $22 million in the U.S. Disney spent tens of millions of additional dollars to market the movie. The studio’s financial exposure was minimized, however, because the movie was financed by billionaire Philip Anschutz.

Disney’s biggest 2004 opening weekend haul was $19.4 million for the Olympic hockey drama “Miracle,” which hit theaters in February.

The studio was hoping “King Arthur” would crack the $20-million mark during its inaugural weekend, but it suffered heavy competition and mixed reviews.

“Maybe there’s a little bit of epic ennui,” said Nina Jacobson, Disney Studios’ production chief.

Disney executives are expecting “King Arthur,” which stars British actors Clive Owen and Keira Knightley, to fare well overseas and ultimately generate brisk home-video sales. “The international market is going to be terrific for us,” said Chuck Viane, the studio’s president of domestic distribution.

The studio’s upcoming slate includes “The Village,” a thriller from “The Sixth Sense” director M. Night Shyamalan, due this month. Next month comes “Princess Diaries 2: Royal Engagement,” the sequel to the hit romantic comedy. Bruckheimer’s “National Treasure,” an action-adventure offering with Nicolas Cage, opens in November. And Disney is expected to do well with its November release of Pixar’s upcoming animated movie “The Incredibles.” Disney splits profits with Pixar and gets a distribution fee.

“We do have hopes for the second half of the year,” Jacobson said. “We’re confident that we can turn things around.” Meanwhile, she said: “We’re grateful that the aftermarket life of last year’s movies has given us shelter during the storm.”

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Times staff writer R. Kinsey Lowe contributed to this report.

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Slow start

So far this year, opening weekend box office receipts for movies released by Walt Disney Co. have fallen behind last year’s.

Top films by opening weekend ticket sales: (In millions)

2003 Finding Nemo* (opened 5/30) $70.3 Pirates of the Caribbean (7/9) $46.6 Bringing Down the House (3/7) $31.1 The Haunted Mansion (11/26) $24.3 Freaky Friday (8/6) $22.2

2004 Miracle (2/6) $19.4 Hidalgo (3/5) $18.8 King Arthur (7/7) $15.2 Raising Helen (5/28) $14.2 Home on the Range (4/2) $13.9

*Made by Pixar, released by Disney Source: Nielsen EDI