You're Not Going To Disney World

By Donovan Sykes: 2008-10-08 01:30:24

On her sweet sixteenth this past Sunday, Miley Cyrus rode a giant purple float down Main Street with Mickey Mouse through a sea of 5000 fans.

On Monday the Mouse had the hangover.

The Los Angeles Times reported Tuesday that “influential” media analyst Jessica Reif Cohen of Merrill Lynch expects Disney stock- the “star performer of the large entertainment-company stocks”- to take an even steeper dive sometime soon. They were down six percent that day alone.

Reif Cohen explains it all for you here. In short: the Mouse House gets more value per trade than any other company in the biz because of its household name status. But they rely for a lot of their operating income on advertising, theme parks and consumer products-- all of which are totally unreliable resources in the face of rising unemployment.

Reif Cohen estimates that roughly sixty percent of Disney’s revenue is susceptible to an economic downturn.

So what’s this mean for your favorite movies? Disney’s CEO Bob Iger no doubt has a plan- probably some secured line of revolving credit somewhere- but the Mouse makes its main money by rolling out the toys, games, and fluffy house shoes when they drop a big tie-in flick, and there’s going to be less money to go around the next time they ramp up for said flicks if nobody’s living the Disney Difference at parks and stores.

Let’s look at what properties Disney has on deck that could potentially become white elephants: Pirates 4, of course – will Johnny get his 56 million now?? Here’s an example of math from the New Economy: Johnny Depp + Ted Elliott and Terry Rossio signed on as scribes = empty treasure chest before you’ve even hired a director for The Lone Ranger (we don’t know how to turn a Western into an incredibly expensive visual rollercoaster, but we’re positive Elliott and Rossio do). National Treasure 3 – will Nic Cage have to settle for cheaper hair? It may be too late to stop The Chronicles of Narnia: The Voyage of the Dawn Treader, which goes before the cameras in January, but if this one is a footdragger at the box office the way Caspian was, Narnians may not get their Silver Chair in 2011. Let’s be realistic - any one of these could be affected by a 60 percent revenue loss. So get out there and buy some maquettes of Cinderella if you want more Cap’n Jack. You’re slackin’. Let's GO, consumer confidence!

Of course, the Mouse and its peers have a backup plan: In the bailout bill that passed last Friday, new provisions were included that for the first time extended tax benefits for production companies to distributors as well, including tax breaks on income from copyrights, and an allowance for “advertising income for content shown on the Internet to be eligible for incentives.”Get the full story from the Hollywood Reporter here.

What’s all that noise mean? It means that in the bailout, Washington left open the possibility for Hollywood to get tax breaks on what income they earn from online advertising. This is because online advertising is currently much cheaper to produce than cable or network commercials- and up until now advertisers have paid less for those online ads. So to try and maintain ad revenue (one of Disney's prime sources of income, remember?), without upping the cost to the advertisers, the studios might be needing a wee break or two on the tax liability for those particular monies from Uncle Sam. THR estimates that this and other provisions will save the industry $487 million over 10 years.

So it looks like the studio heads have it all figured out- just in time for the newly jobless to sit at home and watch Hulu. Because they know we'll give up our guns before we give up our cable modems. Way to make lemonade, Hollywood!!

RELATED: money, pirates of the caribbean 4, disney

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You're Not Going To Disney World

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