Alberto García M

July 21, 2023

One of the big bets within Disney’s strategy is to produce live action films: to transfer the fictional world to a humanized context. Recent examples are Beauty and the Beast, The Lion King, Aladdin, Cruella and a few weeks ago The Little Mermaid. 

The company’s strategic bet is not only based on the above, but also on the controversial issue of inclusion, which seeks to reduce the stereotypes of certain characters by replacing them with characters with new physical and socio-cultural characteristics. 

The Little Mermaid became, perhaps, the most controversial live action by replacing the features of the main character (Ariel) from the cartoon version to a character with a dark complexion for a redhead with a white complexion. There are many divided opinions, in general, to start replacing classic leading characters with different physical characteristics alluding to the same character of the original story, which has had a tremendous impact on the box office, cinemas, streaming and, therefore, on the income of large corporate monsters such as Netflix, Amazon (Prime) and particularly, Disney.

How did Disney stock fare during the screening period of “The Little Mermaid”?

Recall that The Little Mermaid premiered on May 26 in the US and Canada, so we can consider that, at the beginning of that month, the market already had an expectation of what the movie could generate, so we will analyze the share price from May 2 to June 16, considering that the first 15 days from the release date is the indicator of the success or failure of a movie.

Graph 1. Closing market price expressed in USD

Objectively speaking, one film is not the right indicator for the valuation of all of Disney, however, it is the most representative sample of its film content strategy, which is one of the pillars of the entire company.

Considering that Disney’s stock market report on May 10 was considered disappointing and caused the stock to fall, the reality is that The Little Mermaid did not manage to revive or generate a positive expectation due to the disappointing box office reports of the film, which is presumed by different specialized film portals to have grossed between $400 and $460 million dollars versus a production of $250 million dollars plus an additional $140 million dollars in advertising, validating the hypothesis of an unprofitable film.

Walt Disney stock has oscillated in recent weeks in the range of $87 – $90 USD per share, touching lows seen during 2020 (Pandemic) and during 2014 and 2016, so the company is not going through a good time.

Mickey Mouse continues to contemplate live action in its content strategy; inclusion is one of the issues to be considered, therefore, “The Little Mermaid” is the ideal thermometer of this business strategy, which is proving to be disappointing in the eyes of the viewing public and investors.

While Walt Disney’s prime years in the stock market have been 2019 and the close of 2020, specifically 2019 also coincides with its best box office success, “Avengers: Endgame” and “The Lion King” (remastered), where according to the Spinoff portal, its gross was approximately 2.8 MDD in the first film and in the second of 1.65 MDD being around those dates when Disney’s share price was oscillating in a range of $115 – $135 USD.

How did Nintendo do with Mario Bros, and will Barbie be able to revive Mattel? Those are a couple of interesting questions to find out, at the end of the story, these companies live on marketing and movies are part of their business strategy.

For any additional topics related to economics, markets and personal bonds, please contact me directly at agarcia@hedeker.com or in my social network LinkedIn as Alberto García Medina.