In a recent conversation with a friend, we discussed the lack of lasting impressions made by new films, and Inside Out 2 came up. It was a big surprise for him to learn that the film had grossed $1.5 billion. “If Inside Out has done so well, how come I keep losing on DIS stock?” he asked, and he wasn’t off at all. Disney (DIS) stock has lost 21.14% in the last six months and 27.46% in the last five years.
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Well, the answer to this quandary relies on various aspects, such as the pandemic in 2020, which put the whole movie industry on hold, changed the viewing habits of most moviegoers, and accelerated the evolution of video streaming, which has had an impact of its own on theatrical releases. However, the biggest problem is Disney’s brand, which has taken a big hit in recent years, with one controversy rising after another, battering its reputation.
The most recent controversy concerns the remake of the new Snow White, set to be released in March 2025, with the film going through a live and global assassination, making it impossible to see other than a significant loss for Disney studios.
When the brand takes a hit, so will the stock.
In addition, like any other industry, it’s all about decision-making, and Disney is struggling to find the right formula to formulate its branding as entertainment for all families. So, while some of its recent releases have been successful and made huge profits, many films have overwhelmingly underperformed and lost more than $100 million in the process. A glaring example is the 2021 release of The Marvels, which lost an estimated $237 million.
Disney’s Expansion
In the last 15 years, Disney has made several highly publicized acquisitions. In 2009, it acquired the rights to most of Marvel’s assets and Lucas Films, which owned the rights to the Star Wars franchise, each costing them an estimated $4 billion. In 2019, it splashed $71.3 billion to complete the acquisition of 21st Century Fox to become the biggest player in the entertainment industry, possessing more than 28% of the entire movie industry. No other player in the industry is even close to this percentage. The problem is, when you buy everything and every studio, you can easily lose your identity.
The Disney Brand
Although the acquisitions of Marvel and Lucas films have generated large profits, it seems that Disney can’t find its place as “entertainment for all families” in this new era, and the company’s growing problems relate directly to its bruised brand.
Consider that thirty years ago, defining a family and producing a movie intended for families was a reasonably easy proposition and wasn’t as complex as it is nowadays. In simple terms, everything has become more diversified, and producing a film everyone can relate to is becoming increasingly challenging. In Kantar BrandZ’s report of the most valuable brands of 2024, Disney dropped twelve places and now sits at 33. Kantar’s valuation takes into account quarterly reports, legal issues, controversies, and, most importantly, public opinion on the world’s most well-known brands.
You Can’t Please Everyone, and Neither Can Disney
Disney’s ongoing branding problems affect its operations and, ultimately, its stock.
In its efforts to find the public’s soft spot, the company is trying to please all sectors of the public, and by doing that, it is losing its audience and money – and lots of it.
It is being criticized from all corners of the fanbase; one side says it is too woke and politically correct, and from the progressive side, it has received criticism for not being progressive or inclusive enough.
Yes, Disney has registered box office successes in recent years; films like The Avengers: End Game, Avatar: The Way of Water, Star-wars: The Rise of Skywalker, Frozen 2, and Aladin have all made huge profits. However, if you look carefully, you’ll notice that each of them either belongs to a known and successful franchise or is a sequel to an already box office hit from years gone by, just like inside out 2.
On the other side of the spectrum, we find the Eternals from 2021, which lost an estimated $100 million to the studio. Lightyear (2022) surpassed it and lost $106 million, Wish (2023) outdid Lightyear with an estimated loss of $130 million, Turning Red (2022) lost $167 million, and Strange World (2023) lost a staggering $197 million. The list goes on and on.
According to Movieguide, in 2023 alone, Disney lost around $900 million on eight films, and 7,000 Disney employees have lost their jobs. Indeed, Disney can continue producing more Star Wars episodes, but, its new releases aren’t finding their audience, and slowly, the DIS brand is losing its identity, prestige, and, ultimately, stock value.
A Word on the Financials
There’s no doubt that, for now, Disney is strong enough to cope with these losses. However, it still has $47.58 billion in debt, primarily thanks to the Century 21st Fox acquisition. While its Disney+ platform finally turned profitable in the last quarter, its overall quarterly results were underwhelming. Nevertheless, Wall Street analysts consider Dis stock a Strong Buy. It has 18 Buys, 4 Holds, and a price target of $117.88, signaling a 25.51% upside.
Conclusion
In short, Disney is having an identity crisis exemplified by bad decision-making. Today’s landscape has changed dramatically, and targeting the public’s common taste is not as simple as it once was. Disney, instead, has chosen to please everyone, and by doing that, it keeps making bad choices that eventually hurt the Disney brand. So yes, Inside Out 2 may have made $1.5 billion, but these minor successes can’t cover for significant losses, a brand gone missing, and ultimately a volatile stock.
Once, when we thought about Disney, we thought of Mickey, Donald, Snow White, Mogly, and Simba. Today, we mostly think of controversies, flops, and the loss of identity.
