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Behind the Ears

Written by  Published September 18, 2013 05:18
Jay Rasulo, Disney's Senior Vice President and Chief Financial Officer,  held an investors conference on Thursday 12th September 2013 at the Bank  of America Merrill Lynch 2013 Media, Communications & Entertainment  Conference. During a question and answer session, Rasulo divulged a wealth of  information about the company and touched upon the direction in which  the company is headed in the near future. Rasulo was quick to note that  with their recent acquisitions, increased merchandise sales and the  construction of a new theme-park in Shanghai, Disney expects substantial  growth by 2015:  

"We estimate-- and I'm just going to move to the balance sheet for a  second-- we are estimating a 15% compounded growth rate in free cash  flow from the end of fiscal 2012 through fiscal 2015. Even if we assume  $5 billion in capital returns during this period, $5 billion per annum,  we estimate that you will have a significant cash position of over $9  billion."

This news will calm existing concerns by investors.  The financial  implications of  The Lone Ranger have long been investigated by the  media and while  merely touched upon during the event,  Rasulo did  indicate that the company has learned from their mistakes:

"There needs to be a cap on tentpole, non-franchise movies. We need to  cap those at a level that allows us to experience good economics and  doesn't quite put as much at risk. So going forward you're really going  to see a cap on the spending on those movies, which I think from a risk  management perspective, puts us in a much better place in terms of our  Studio slate."

Some commentators have expressed their disappointment with this TheLoneRanger2013Poster statement, yet it's an opinion that I strongly support. Last month, I  wrote an extensive article about why I feel that the film industry  cannot continue to sustain budgets of gargantuan proportions (see link

Rasulo went on to explain the reasons behind the release of Pixar's  Planes. He unapologetically explained that the Cars franchise is one of  their biggest earners. This ultimately led to the creation of Cars Land  and, aiming to further capitalise on the brand, the company introduced  the spin-off film Planes. The film has since had an astounding impact on  Cars merchandise sales; thus it continues to be one of the company's  largest earners.

Star Wars fans will undoubtedly rejoice in the news that Disney will  expand upon its merchandising to equal or exceed that of the Marvel  franchise. Rasulo stated:

"Star Wars has been very narrowly focused in the licensing world around  toys and books, and few other categories. If you look at Marvel and  Disney, we are both much broader in terms of other categories -- soft  goods, housewares, all the stuff you see us in and now you see Marvel  in."

Rasulo continued:

"Our strategy with Marvel and again with Star Wars is to take that all  in-house into what is the most -- biggest and most powerful licensing  organization in the world. And so, up until 2015 we will lay the  groundwork for all of that just as we did with Marvel in anticipation of  The Avengers. And then when the film comes out in 2015 we will be ready  to blow it out."

Over the next decade, Disney will release multiple films each year  including: two to three Pixar features, two Marvel films, one Disney  animation and one Star Wars film. Rasulo expanded upon the non trilogy  Star Wars film by expressing that it will be an origin film:

"Star Wars either trilogy film or origin story film."

Star-Wars-Disney-8What I find intriguing is that Rasulo considers each of the standalone  Marvel films to be an origin story. As there has been an expressed wish  for the Star Wars franchise to follow in similar footsteps to the Marvel  films, we may be introduced to a series of films that interlink with one  another. At present, a standalone Yoda or standalone Han Solo film are  the favorites to be the first 'Origin Film'.

I believe that the films will either expand upon new characters seen in  Episode VII, or will look to create a new franchise within a different  time-frame. After the introduction of three to four films, I would  expect to see an Avengers style film, an event that brings the loosely  connected characters together to fight a greater evil.

The Old Republic era has had a successful expansion through video  games, comics and toys. As illustrated above, Planes, and Finding Nemo  sequel Finding Dory, have been created to capitalise on merchandise  sales and while the Old Republic era is not nearly as popular or as  profitable as the Original Trilogy, it's an untapped resource that isn't  hindered by cannon or casting choice.

Filling the shoes of existing characters is an impossible task,  regardless of which actor is cast in the role:  it will become difficult  to believe in a film that is missing the original actor who due to age,  is unable to reprise their role in their character's Origin story.

The only way to avoid this, in particular with Han Solo, is for the  character's 1336493081_The-Avengers-bannerOrigin Story to take place either while he is a child or  late teen. As seen with the Prequels, this can have devastating results  and despite it being ten years since the release of Episode III, it is a  wound that has not yet healed.

Regardless, it will be fascinating to witness the direction in which  the Star Wars saga is headed. It would appear that the rejuvenation and  expansion of Star Wars merchandising begins with producing a film that  pleases fans. As Rasulo stated:

"Well, the strategy behind the Star Wars Consumer Products, number one,  put out a great film, right, that is number one."

This is a refreshing and exciting take on the franchise and going by  the strategies employed with the Marvel properties, I for one feel relaxed in knowing that the franchise is in safe hands.

Last modified on Saturday, 11 April 2015 15:42
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