'Frozen' is headed for a billion-dollar profit. Credit: Walt Disney Co.

'Frozen' Likely to Turn a Billion-Dollar Profit

As 'Frozen' Opens in Japan, Film Could Push Past 'Toy Story 3' to Become Top Animated Film of All Time

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Walt Disney Animation Studios is about to reign again as the king of animated films, thanks to a movie released more than 90 years after Walt Disney made his first cartoon.

The studio's smash "Frozen" has generated $1.01 billion in global ticket sales since Nov. 22. Opening today in Japan, its last major market, the film could push past "Toy Story 3" to become the top-grossing animated feature of all time.

That puts the turnaround that began at the Walt Disney Co. unit with 2010's "Tangled" into full bore. After creating the genre, Disney Animation for years went astray, its pictures overshadowed by hits from rivals like Pixar Animation Studios. Disney bought Pixar in 2006 and appointed its top officers, Ed Catmull and John Lasseter, to also oversee Disney Animation. With "Frozen," the studio that introduced Mickey Mouse with "Steamboat Willie" in 1928 has cemented its comeback.

"It shows they've got the goods," said Tom Nunan, an executive producer of the 2004 Oscar-winner "Crash" and a visiting professor of film at the University of California at Los Angeles. "It's a great motion picture. You could call 'Frozen' an animated classic."

Counting revenue from DVDs and TV, Disney stands to make almost $1 billion in operating profit from the film, according to estimates from analysts from SNL Kagan and Gabelli & Co. That's before merchandise sales around the world and the Broadway show now in the works -- and a possible sequel.

"That's the magic of Disney's business," said Dan Salmon, an analyst with BMO Capital Markets Corp. in New York who has the equivalent of a "buy" on the stock. "You get a property and you can monetize it in ways that go beyond the box office."

"Frozen" has done so well that analysts have boosted projections for the whole company. Salmon raised his estimate for Disney's fiscal 2014 per-share earnings to $4.09 from $4.00 and predicts the movie division's operating income will rise 48 percent to $979 million. Nomura Securities analystAnthony DiClemente said "Frozen" could mean his $140 million estimate for the divion's second-quarter profit is too conservative.

Paul Roeder, a spokesman for Disney, said there have been no announcements about a sequel. He didn't respond to a request for comment on the movie's profitability.

Based loosely on "The Snow Queen" by Hans Christian Andersen, "Frozen" has been a slow burn. It was No. 2 in the weekend after its Nov. 27 U.S. wide release, behind Lions Gate Entertainment Corp.'s "The Hunger Games: Catching Fire." It rose to No. 1 the following week and moved up to that slot again in its seventh week, a feat only six films have managed since 1984, according to Rentrak Corp.

Marketing machine
Theater attendance has been stoked by good reviews, repeat visitors -- a sing-a-long version was released Jan. 31 -- and social media buzz, some of it created by Disney. It's posted more than 100 clips on YouTube, including videos showing how to create Princess Elsa's French braids.

Merchandise is a big part of the strategy at Disney, which is the largest licensing company in the world. It's sold almost 500,000 dolls modeled after Elsa and her sister Princess Anna; during a limited-edition offer in January, almost 5,000 were snapped up in 45 minutes at Disneystore.com, a record for the site.

Mattel, a Disney licensee, has sold more than $100 million of "Frozen" toys, while licensee Jakks Pacific has sold tens of millions of dollars worth, according to Sean McGowan, an analyst who follows the companies at Needham & Co. He said that means about a $15 million in profit for Disney.

Disney spent about $323 million producing, marketing and distributing "Frozen," which could generate $1.3 billion from ticket sales, digital downloads, DVDs and TV rights, according to Wade Holden, an analyst with the media research company SNL Kagan. Brett Harriss, a Gabelli & Co. research analyst, agrees on revenue but puts total costs at $350 million.

Disney Animation -- which made the first feature-length animated movie, 1937's "Snow White and Seven Dwarfs" -- needed a shot in the arm. After a string of home runs in the 1980s and 1990s under then-studio chairman Jeffrey Katzenberg, Disney released duds like 2002's "Treasure Planet" and "Home on the Range" in 2004. Meanwhile, others, most prominently Pixar, changed the landscape with hits like "Toy Story" and "Finding Nemo."

'Brain trust'
The Disney studio had grown stodgy and bureaucratic, according to Steve Hulett of the Animation Guild in Burbank. Said Phil Contrino, the chief analyst at Boxoffice.com, "Disney was being written off."

Then, in 2006, Disney CEO Bob Iger paid $7.4 billion to buy Pixar. While it remained a separate unit, he handed Mr. Catmull and Mr. Lasseter, the Pixar executives behind the groundbreaking "Toy Story" series, responsibility for Disney's legacy animation business.

They gave animators and directors more freedom, keeping executives away from the filmmaking process, according to Brian Ferguson, who was a Disney animator for 23 years and now teaches at California Institute of the Arts in Los Angeles.

"They're letting the department heads run their departments," he said. "They encourage communication between departments; that was a huge leap. Things were so tightly micromanaged it was hard to make any progress."

The challenge for Disney is now in following up with more. There's a lot of competition, from DreamWorks Animation SKG, Comcast Corp.'s Universal Pictures, 21st Century Fox and Warner Bros., which has a hit in "The Lego Movie."

Pixar won't be in theaters this year, having delayed its next project, "The Good Dinosaur." Disney Animation releases "Big Hero 6," an anime-style film based on Marvel Comics characters, in November. "Zootopia," set in a futuristic world where animals live like humans, comes in 2016, according to Imdb.com.

~ Bloomberg News ~

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