Disney's Huge Loss on Marvel Movies and the Road Ahead"

In the vast universe of movies, Marvel movies have always been shining stars, attracting the attention of countless audiences around the world. However, can you imagine? The once glorious Disney actually lost nearly three hundred million dollars on just two Marvel movies! This astonishing news is like a shocking movie storm that has swept through the entire entertainment industry. Today, let's delve into the story behind this event and experience the ups and downs of the movie business world.

I. The Shocking Figures of Huge Losses

In 2023, Disney lost about $296.4 million just because of two Marvel superhero movies. This is not a small amount. It is enough to shock and sadden any movie company. According to the analysis of recently released financial statements, the cost of making "The Marvels" and "Ant-Man and the Wasp: Quantumania" was as high as $762.4 million (about £609.3 million). After deducting the $124.9 million (about £99.4 million) in government incentives received by Disney, its net expenditure on these two movies still reached $637.5 million. However, the box office performance of these two movies was disastrous.

Data from industry analyst Box Office Mojo shows that the total box office of these two movies was $682.2 million. Usually, theaters retain 50% of the box office revenue, and the remaining part goes to the studio. This is in line with the results of a survey by film industry consultant Stephen Follows in 2014. He interviewed 1,235 film professionals and concluded that, according to studios, theaters on average retain 49% of the box office revenue. This means that Disney only received $341.1 million from "The Marvels" and "Ant-Man and the Wasp: Quantumania".

II. Luxurious Cast and Huge Costs

These two movies are truly star-studded. Oscar winner Brie Larson leads the cast of "The Marvels", while Michelle Pfeiffer, Michael Douglas, and Paul Rudd star in "Quantumania". These two movies are sequels to popular franchises whose predecessors' box office revenues exceeded one billion dollars. However, the new installments got into trouble.

To make these two movies, Disney spared no expense. From the cast to the special effects production, every aspect was invested with a huge amount of money. But why didn't such a high investment bring corresponding returns? The reasons behind this are worthy of our in-depth consideration.

III. The Double-Edged Sword of Sci-Fi Settings

The sci-fi settings of these two movies became an important factor in their failure. Compared with their predecessors, their sci-fi backgrounds are far from the realistic roots, which made the adult audiences who came for the predecessors feel strange and alienated. As a result, these two sequels were criticized by critics and performed poorly at the box office.

The box office of "Quantumania" was only $476.1 million, not only lower than its predecessors but also equivalent to only 17% of the $2.8 billion box office of Marvel's 2019 blockbuster "Avengers: Endgame". The box office of "The Marvels" was even more disastrous, only $206.1 million, becoming the movie with the lowest box office among the 34 movies in the Marvel Cinematic Universe.

IV. Problems in the Production Process

Disney's CEO Bob Iger could not ignore the poor performance of these two movies. He said last year that since "The Marvels" was shot during the pandemic, "there wasn't as much supervision on the set, so to speak, where we have executives there, really looking over what's being done day after day after day."

Disney usually does not publicly discuss its spending on specific movie productions and did not respond to our request for comment. Movie budgets are usually a closely guarded secret. This is because studios combine the costs of individual movies into their overall expenses, and their filings do not itemize the specific spending on each movie. However, movies made in the UK are an exception. "The Marvels" and "Quantumania" both fall into this category.

Studios shoot in the UK to benefit from the UK's Audio-Visual Expenditure Credit (AVEC), which provides them with a cash reimbursement of up to 25.5% of their spending in the UK. To qualify for the reimbursement, at least 10% of the production costs need to be related to activities in the UK. To prove this to the UK government, studios usually set up a separate production company in the UK for each movie they make there.

These companies must submit financial statements, which expose their budgets. The statements reveal all information from the headcount and salaries to the reimbursement level and total costs. Studios directly receive revenue from theater tickets, streaming, and Blu-ray sales and bear the marketing costs. The function of the UK companies is solely to make movies.

These production companies usually have code names so that they won't attract the attention of fans when applying for filming permits. "Quantumania" was made by a Disney subsidiary called Pym Productions III UK, a nod to the fictional particles that enable Rudd's Ant-Man character to shrink. The Disney company behind "The Marvels" is named Warbird Productions II UK, reflecting the name of Larson's character in the comics on which the movie is based.

The latest financial statements for Warbird cover the year ending September 30, 2023, just over a month before the movie was released. So they almost completely present the cost situation of the movie. The statements show that since the company was founded in 2020, it has spent a total of $374 million (about £307.85 million). After receiving a $66.6 million (about £54.9 million) reimbursement from the UK government, its net expenditure was reduced to $307.4 million. The financial statements say that its cost is "in line with the production budget."

This is far from Variety's claim that "The Marvels" "cost $250 million". In fact, it costs 49.6% more than that, which is closer to the forecasts made by experts Jonas Campbell and Valliant Renegade nearly a year ago.

The filings for Pym Productions cover the year to December 31, 2023, ten months after the movie was released. So they also clearly present the cost situation of the movie. Since the company was founded in 2019, the cost of this movie has reached $388.4 million (about £301.45 million). Thanks to a $58.3 million (about £44.5 million) reimbursement, its net expenditure was reduced to $330.1 million. But this is still not a satisfactory result. The filings also mention that "at the year-end, the cost was forecasted to exceed the production budget."

This led to a $92.05 million loss at the box office for this movie, which is precisely in line with the prediction made by Valliant Renegade 18 months ago. In an extremely prescient post on X in April 2023, he wrote that "Ant Man 3 is a big loss, probably around $100M from what we can tell." His prediction was exactly right.

When Iger returned from retirement to run Disney again in November 2022, it was too late for him to do anything about the huge costs of these two movies. But these two movies did not escape his attention.

In February last year, he told investors that Disney needs to "reduce costs on everything that we make because, while we're extremely proud of what's on the screen, it's gotten to a point where it's extraordinarily expensive." Since then, he has cut $7.5 billion in costs by reducing content spending and laying off more than 7,000 employees, with 300 jobs lost just last week.

V. Comparison and Hope

Although "The Marvels" and "Quantumania" suffered setbacks, Disney is not without successful works. Recent movies such as "Deadpool & Wolverine" have achieved quite good results. This movie became the highest-grossing R-rated movie of all time with a box office of $1.3 billion.

In addition, Disney's "Inside Out 2" recently became the highest-grossing animated movie of all time with a box office of $1.7 billion. However, although Disney has had some bright spots at the box office, its stock price has fallen by more than 50% compared to its peak in March 2021. This is mainly due to the decline in the fortunes of its Experiences segment, which includes its theme parks and cruise lines.

The perfect storm of rising costs and softening demand at Disney's domestic parks led to a 3% drop in operating income from the Experiences segment in the third quarter of 2024 compared to the same period last year, falling to $2.2 billion. Disney's chief financial officer Hugh Johnston explained at the earnings announcement in August that "we saw attendance flat in the quarter" and a "flattish revenue number" is forecasted for the fourth quarter, and a slowdown is expected for "a few quarters."

This is reflected in Disney's third-quarter earnings report, which reveals that "the demand moderation we saw in our domestic businesses in Q3 could impact the next few quarters. While we are actively monitoring attendance and guest spending and aggressively managing our cost base, we expect Q4 Experiences segment operating income to decline by mid single digits versus the prior year." So although Disney may have regained its magic at the box office, a happy ending for investors may still be far away.

In the world of movies, success and failure are often separated by a thin line. Disney's huge loss on these two Marvel movies has sounded an alarm for us, showing us the huge business risks in the movie production industry. However, this also makes us look forward to Disney learning from its mistakes and regaining its glory in the future. The charm of movies lies in their ability to bring us endless imagination and touch. The challenge of the movie industry is to find a balance between commercial interests and artistic value. Let's wait and see how Disney will move forward on the movie road in the future.

Conclusion: Movies are a wonderful adventure. They can take us through time and space and let us experience different worlds and lives. As a giant in the movie industry, Disney has always been creating countless wonderful and touching works for us. However, the huge loss on these two Marvel movies has shown us the cruelty and uncertainty of the movie business world. But we believe that Disney will not be defeated by this setback. It will continue to work hard and bring us more excellent movie works. Let's look forward to Disney's future and expect it to create movie miracles again.