Disney’s (DIS - Free Report) Frozen 2 lived up to expectations as the animated movie broke box office collection record following its release on Nov 22, 2019. In the opening weekend, the sequel to 2013’s Frozen collected $358.4 million — the “biggest global animated debut of all time.”
In the United States, Frozen 2 collected $130.2 million, which is a record for any animated movie released in November or outside the peak summer season. The opening weekend collection was also the biggest ever for Walt Disney Animation.
Moreover, Frozen 2’s domestic collection makes it the “third-highest animated debut of all time in the U.S.” The movie’s domestic box office collection also surpassed Frozen’s $93 million over the five-day Thanksgiving holiday weekend.
Further, per Disney, Frozen 2 collected $53 million in China, where it had the third-highest opening weekend ever for an animated title. Additionally, the movie had the third-highest industry opening ever in Korea, the highest opening weekend ever for an animated title in France and the U.K. (over a three-day period).
Can Studio Strength Aid Disney’s Top Line?
Disney’s Studio Entertainment segment’s revenues benefited from strong content. In the recently concluded fourth quarter of fiscal 2019, the segment revenues surged 52% year over year to $3.31 billion. It benefited from the solid performance of The Lion King, Toy Story 4 and Aladdin.
Notably, five Disney films — Avengers: Endgame, The Lion King, Captain Marvel, Aladdin and Toy Story 4 — crossed the $1-billion mark at the global box office this year. Per CNN, Disney now holds the record for the most billion-dollar movies in a single year.
The first Frozen film had collected $1.28 billion globally, which Frozen 2 is now expected to surpass.
Furthermore, Star Wars: The Rise of Skywalker, set to launch in December, is expected to be a blockbuster. This along with the success of Frozen 2 is expected to drive Studio Entertainment segment’s first-quarter fiscal 2020 top line.
However, Disney expects 21CF film studio to report an operating loss of roughly $60 million.
Moreover, the company projects the 21CF acquisition and the impact of taking full operational control of Hulu to hurt fiscal first-quarter earnings before purchase accounting by 30 cents.
Investments in Disney+, ESPN+ and Hulu to Hurt Profits
Additionally, Disney’s bottom line is expected to be hurt by continuous spending on streaming services in the face of stiff competition from Amazon (AMZN - Free Report) , Netflix (NFLX - Free Report) , and Apple’s (AAPL - Free Report) recently launched Apple TV+ service.
Disney expects continued investment in ESPN+ and Disney+, and the consolidation of Hulu to hurt DTC & International segment operating income by $850 million.
Notably, Disney launched Disney+ in the United States, Canada and The Netherlands on Nov 12. The service is priced competitively compared with both Netflix and Apple TV+.
While Disney+ costs $6.99 per month, the company is also offering a bundle package of Disney+, ESPN+ and ad-supported Hulu for $12.99 a month. This alone is anticipated to be a game changer in the streaming service space.
However, it would be foolish to ignore Apple’s aggressive pricing strategy for Apple TV+. At $4.99 per month, it has undercut the pricing of every other streaming service provider.
Disney currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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