Disney has announced a $50M write-down write-down for scrapping an untitled stop-motion animation film from Henry Selick, who directed “Coraline” and “The Nightmare Before Christmas. The story came out yesterday when Disney CFO Jay Rasulo talked about it at a Bank of America Media Conference. This is very interesting because, like John Carter (and unlike almost every other action by every other studio), Disney announced this mid-quarter as a standalone announcement. It thus reflects a “new pattern”, perhaps — one that started with John Carter. What can be learned from it? I do think there’s a little bit of corporate shell game financial disclosure going on here — and I think this sheds further light on why the John Carter announcement was made like it was.
First, read this full article from NY Post and pay particular attention to the paragraph at the end:
After the $200 million “John Carter” fiasco, Disney is set to take another mega-million dollar movie hit.
The media giant, led by CEO Robert Iger, will take a $50 million write-down for scrapping an untitled stop-motion animation film from Henry Selick, who directed “Coraline” and “The Nightmare Before Christmas.”
The move will cut quarterly earnings by two cents a share, Jay Rasulo, the company’s chief financial officer, said yesterday at a Bank of America media conference.
While Rasulo didn’t elaborate on the reasons, the project was cancelled after the arrival of new studio boss Alan Horn. The movie was slated for release in October 2013.
Disney’s former film boss, Rich Ross, was forced out shortly after the “John Carter” debacle, which ranks as one of the biggest flops in movie history.
Rasulo also said advertising wasn’t as strong as expected, although he predicted a better fourth quarter.
“We did not see the kind of rebound after the Olympics that we thought we’d see, when we gave our last view of advertising with our third-quarter results.”
Now….reading slightly between the lines, what I see is that they are making this untitled future film project take the fall not only for the write-down associated with that, which can be shrugged off as “cost of doing business” as a studio — but is it possible that they are burying some of the shortfall in advertising revenues in that figure as well? On the one hand, when the quarterly financials come out — it seems like the two would be bifurcated since “studio entertainment” is where the write-down would be lodged, and “media networks” is where the shortfall in ad revenue would be lodged . But these both feed down to the same bottom line and that bottom line is what determines earnings per share, etc. So by making this announcement and setting the write-down big enough to cover the impact of BOTH the film stop and the ad revenue shortfall, it effectively re-sets the “expectations bar” and minimizes the damage in terms of stock price, etc. Interesting. Certainly not illegal or even improper, but clearly there’s a strategy there.
I would be interested in hearing opinions from those who may be better experts at this sort of thing than I am.