What's going on here?
Belle may have got her Beast, but Disney got $170 million in weekend box office revenue following the opening of Beauty And The Beast (tweet this). The strong performance reminded investors of some of Disney’s traditional strengths.
What does this mean?
Good ol’ fashioned filmmaking is helping Disney ward off some of the concern associated with ESPN, its struggling televised sports division. In a sign of the value of its franchise, Disney is taking old animated classics, like Beauty and The Beast, and remaking them into “live action” films featuring real actors. Along with Pixar animations (e.g. Finding Dory), Marvel superhero movies (Captain America: Civil War) and the Stars Wars franchise (which it now owns), Disney is producing blockbuster movies that are making a material impact on its profits. Furthermore, Disney is able to use those movies to sell merchandise and entice more visitors to its theme parks.
Why should I care?
For the markets: Disney’s stock has enjoyed some magic recently.
Six months ago, Disney’s stock was languishing around $90 per share as investors fretted over declining subscribers at ESPN. While that division remains an issue, investors have clearly become more confident in the Disney story as the stock is now at $113. The strength of its diversified operating model, i.e. movies, merchandise and theme parks, probably has something to do with that.
The bigger picture: The power of (some) brands is eternal.
Disney’s movie strategy rests largely on resurrecting brands from the past, which is an indication of how difficult it is to create new brands that resonate with people. The huge recent proliferation of content may have something to do with that: with greater competition for our viewing attention, it is much harder to re-create the resonance of a movie like Beauty and The Beast now than it was when the animated film was first released in 1991. If true, that would benefit companies like Disney that have a portfolio of iconic brands from previous decades.