uploads///STudio Entertainment segment revs distri in fiscal Q

Can Disney Studio Entertainment Continue Its Box Office Success?

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Nov. 7 2016, Updated 10:05 a.m. ET

Disney’s Studio Entertainment segment

The Walt Disney Company’s (DIS) Studio Entertainment segment has continued to see success at the box office. In a press release on November 2, Disney stated that its Studio Entertainment segment had its most successful year yet at the global box office, with its movies earning around $5.9 billion in the year ended November 1. Three of Disney’s movies—Captain America: Civil War, Zootopia, and Finding Dory have already crossed the $1 billion mark at the global box office.

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In its fiscal 3Q16 earnings call, Disney stated that, since its acquisition of Pixar in 2006, it has released a total of 29 movies under the Pixar, Marvel, Disney Animation, and Lucasfilm brands. All of these movies have earned an average of around $800 million at the global box office. The company also said that the success of these movies at the box office means that it’s able to generate more value from them through consumer products, television, parks, and resorts.

As the chart above indicates, theatrical distribution made up 53% of the company’s Studio Entertainment segment, with revenue of $1.5 billion in fiscal 3Q16.

Disney’s studio acquisitions are paying off

Disney acquired Marvel in 2009 and Pixar in 2006. The company has managed the profitability and quality of these two assets following their acquisitions. In fiscal 2013, Disney acquired Lucasfilm for $4.1 billion—another win for the company given the success of the Star Wars franchise. Disney’s peer Comcast (CMCSA) announced its acquisition of DreamWorks Animation earlier this year. Disney has also announced a new Indiana Jones movie, which is set to be released in 2019.

At a Deutsche Bank (DB) investor conference in March 2016, Disney stated that it considered ROIC (return on invested capital) an important criterion for its movie business. Disney saw its ROIC, excluding returns from the Star Wars movie, rise from 20% in 2014 to 30% in 2015. This indicated that Disney outperformed its competitors, including Comcast’s Universal Pictures, in the studio entertainment business. The movie business usually sees a 10% ROIC.

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