Another one of the eight best investing blogs, 24/7 Wall St., has a new post entitled “Disney’s Pixar Purchase: Never Give a Sucker an Even Break“. The post mentions that this weekend’s estimated $47.2 million opening for Disney/Pixar’s “Ratatouille” was the worst Pixar opening in nine years.
Regardless, Ratatouille was number one at the box office despite tough competition from films such as Live Free or Die Hard and Evan Almighty – well, not exactly tough competition in the latter case as Evan Almighty has been a big financial disappointment.
You could see it coming. If you look at any list of top grossing movies (adjusted for inflation) comedies don’t do particularly well, especially considering how many get produced. The recipe for a huge money maker is simple – and goes back to long before the beginning of movies – make it epic, make it exciting, make it fantastical or historical (just don’t make it commonplace), and make it for all ages. Most comedies don’t score well on those counts. I suppose Evan Almighty does better than most comedies in aping the epic dramas that work. In fact, it matched them a bit too well with a price tag around $175 million.
Why have I spent a full paragraph on Evan Almighty when I’m supposed to be writing about Disney, Pixar, and Ratatouille? Because price matters. Here’s some of what 24/7 Wall St. had to say about Disney’s acquisition of Pixar:
It would appear that Jobs sold at the top. It would also appear that Disney got a lousy deal. It’s their own fault. Jobs was able to get more for the company than it was worth. The markets have learned not to underestimate him…But, Disney got burned.
I’m sticking with that I wrote about a year and a half ago:
Is Pixar worth $7 billion (or whatever the offer ends up being)? That’s a complicated question. First of all, you have to ask if $7 billion of Disney’s stock at today’s market price is actually worth more or less than $7 billion. What’s the chance that Disney’s stock is currently undervalued and Pixar’s is currently overvalued? It’s a real possibility.
On the plus side, this could mean Disney CEO Robert Iger wants to take Disney in a different direction from what we’ve seen lately. I’ve always thought the real value at Disney would come from providing content not distributing it. If the company really wants to be some sort of “diversified entertainment company” wouldn’t a company built around kids make more sense?
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A company focused on animation, theme parks, the Disney Channel, etc. would make more sense to me. In fact, a few years ago, I would have been very happy if Disney announced an acquisition of a toy maker, video game publisher, or licensing company that had something to