Disney Blindsided by Fox Box Office Struggles: ‘Well Below What We Thought It Would Be’

When Disney fought to acquire the film and TV entertainment assets of 21st Century Fox, it expected a much higher performing movie business. The media and entertainment behemoth on Tuesday reported earnings for the fiscal third quarter, and though its film division increased 33% year-over-year to $3.8 billion, Fox’s film business had an operating loss of $170 million, CFO Christine McCarthy said during the company’s quarterly call with the Wall Street community. The brunt of the loss was placed on the poor performance of “Dark Phoenix,” which had a hefty production budget of $200 million not including marketing, and grossed $65.8 million domestically and $252.4 million worldwide. “One of the biggest issues we faced in the quarter was the performance of the Fox film business,” Disney CEO Bob Iger said during the call. “It was well below what it had been and well below what we thought it would be when we did the acquisition.” (The company had estimated $180 million in operating income from Fox films for the same quarter last year.) It’s hard to feel too bad for Disney though. The studio recently broke its own annual global box office record, grossing roughly $8 billion with five months still to go in the year. Yet Disney shares fell nearly 4% in after-hours trading after the company reported earnings and revenue that fell short of Wall Street’s expectations. Iger pointed to Disney’s $71.3 billion acquisition of Fox’s assets and the company’s efforts to integrate the businesses and personnel as reasons for the below-expected results. “I know what happens when a company gets bought,” Iger said, “typically operations and decision making comes to a halt. We avoided that when we acquired Pixar and Lucasfilm, but this was a very different position for Fox.” To put it bluntly, there was mounting uncertainty within Fox while it dangled in near limbo for more than a year with employees waiting for the acquisition to close and marching orders to come down. Disney announced plans to buy the studio in December 2017 and the deal didn’t close until March 2019. Fox’s theatrical business is just one puzzle piece, however. Though the films released so far in 2019 have underperformed, there’s plenty Disney is excited about with concern to the acquisition. Particularly, Iger said, the company is looking forward to leveraging the Fox library for its forth-coming Disney+ streaming service. He said Disney has plans to reimagine “Home Alone,” “Night at the Museum,” and “Diary of a Wimpy Kid” for the platform. Iger also painted a positive future for the Fox film slate and the steps the team is taking to construct an all new development slate, focusing on fewer films. But it will likely take some time to see Disney’s thumbprint on the Fox slate come through. Iger did pinpoint some of Fox’s more valuable franchises though, in “Avatar,” “Planet of the Apes” and the closely monitored superhero IP of “Deadpool,” X-Men and the Fantastic Four. He even pointed to some bright spots still to come in the 2019 slate. “We like some of the movies that are coming up. There’s a specific one, ‘Ford vs. Ferrari,’ which we’ve all seen and it’s great,” Iger said. “It will probably take about a year, maybe two before we’re able to have a real impact on projects in development, but we’re confident that we can turn around the fortunes of Fox live action.”