Disney Lost Nearly A Third Of A Billion Dollars On Two Marvel Movies

03 Oct 2024 by Caroline Reid · Forbes

Disney made an estimated $296.4 million loss at the box office on just two of its Marvel superhero movies in 2023 according to analysis of recently-released financial statements.

They reveal that the cost of making The Marvels and Ant-Man and the Wasp: Quantumania came to a staggering $762.4 million (£609.3 million) before Disney banked $124.9 million (£99.4 million) in government incentives bringing its net spending on the movies down to $637.5 million. They both bombed at the box office.

According to industry analyst Box Office Mojo, the movies grossed a combined $682.2 million with theaters typically retaining 50% of the takings and the remainder going to the studio. This reflects the findings of film industry consultant Stephen Follows who interviewed 1,235 film professionals in 2014 and concluded that, according to studios, theaters keep 49% of the takings on average. It would give Disney just $341.1 million from The Marvels and Ant-Man and the Wasp: Quantumania. No expense was spared on them.

Both films featured a glittering array of A-List actors with Oscar-winner Brie Larson headlining The Marvels whilst Michelle Pfeiffer, Michael Douglas and Paul Rudd starred in Quantumania. They were both sequels to franchises which had grossed more than $1 billion but the new instalments were a whole new world.

Their sci-fi setting strayed far from the realistic roots of their predecessors and this alienated the adult audiences who turned up to watch the previous movies. It led to their sequels being panned by critics and underperforming in theaters.

'Quantumania' made less than a fifth at the box office than Ant-Man's previous outing 'Avengers: ... [+] Endgame'Marvel Studios

Quantumania grossed $476.1 million which was lower than both of its prequels and equivalent to just 17% of the $2.8 billion made by Marvel's 2019 blockbuster Avengers: Endgame. The Marvels fared even worse with takings of just $206.1 million giving it the lowest haul of any of the 34 movies in the Marvel Cinematic Universe.

Disney's Chief Executive Bob Iger couldn't ignore the dire performance and said last year that because The Marvels was shot during the pandemic, "there wasn’t as much supervision on the set, so to speak, where we have executives there, really looking over what's being done day after day after day."

Disney does not publicly discuss how much it spends on specific productions and did not respond to a request for comment. Budgets are usually a closely-guarded secret. This is because studios combine the costs of individual pictures in their overall expenses and their filings don't itemize how much was spent on each one. Films made in the UK are exceptions and both The Marvels and Quantumania fall into this category.

Studios shoot in the UK to benefit from its Audio-Visual Expenditure Credit (AVEC) which gives them a cash reimbursement of up to 25.5% of the money they spend in the country.

To qualify for the reimbursement, at least 10% of the production costs need to relate to activities in the UK. In order to demonstrate this to the UK government, studios tend to set up a separate production company in the country for each movie they make there.

The companies have to file financial statements which shine a spotlight on their budgets. They reveal everything from the headcount and salaries to the level of reimbursement and the total costs. Studios directly receive the revenue from theater tickets, streaming and Blu-ray sales and carry the costs of marketing as the function of the UK companies is purely making the movies.

They usually have code names so that they don’t raise attention with fans when filing for permits to film on location. Quantumania was made by a Disney subsidiary called Pym Productions III UK in a nod to the fictional particles which enable Rudd's Ant-Man character to shrink. The Disney company behind The Marvels is named Warbird Productions II UK reflecting the name of Larson's character in the comics that the movie is based on.

The latest financial statements for Warbird are for the year-ending September 30, 2023, which is just over a month before the movie was released so they give an almost complete picture of its costs. They show that since the company was founded in 2020, it spent a total of $374 million (£307.85 million). Its net spending was reduced to $307.4 million by a $66.6 million (£54.9 million) reimbursement from the UK government and the financial statements say that its cost was "in line with the production budget."

It's a world away from Variety's claim that The Marvels "cost $250 million". In fact, it cost 49.6% more than that which is more in line with the forecasts made by expert pundits Jonas Campbell and Valliant Renegade nearly a year ago.

The filings for Pym Productions cover the year to December 31, 2023 which is 10 months after the movie was released so they too give a clear picture of its costs which came to $388.4 million (£301.45 million) since the company was formed in 2019. This spending was reduced to a net $330.1 million thanks to a $58.3 million (£44.5 million) reimbursement. It still wasn't a dream ticket as the filings add that "at the year-end the cost was forecasted to exceed the production budget."

It left the movie with a $92.05 million loss at the box office, which is precisely in line with the prediction from Valliant Renegade a massive 18 months ago. In an extraordinarily prescient post on X in April 2023, he wrote that "Ant Man 3 is a big loss, probably around $100M from what we can tell." It was bang on the money.

By the time that Iger returned from retirement to run Disney again in November 2022 it was too late for him to do anything about the colossal costs of either of these movies but they didn't escape his attention.

In February last year he told investors that Disney needs to "reduce costs on everything that we make because, while we're extremely proud of what's on the screen, it's gotten to a point where it's extraordinarily expensive." Since then he has slashed $7.5 billion of costs by cutting content spending and laying off more than 7,000 staff with 300 jobs lost last week alone.

He has also had a magic touch on the performance of Disney's movies as Inside Out 2 recently became the highest-grossing animated movie of all time with takings of $1.7 billion. It was followed by Marvel’s Deadpool & Wolverine, which hit $1.3 billion making it the highest-grossing R-rated movie ever.

Despite this, Disney's stock price is more than 50% down on its March 2021 peak of $201.91. It is being driven by a decline in the fortunes of its Experiences segment which includes its theme parks and cruise line. A perfect storm of costs climbing and demand softening at Disney's domestic parks led to its operating income from Experiences falling by 3% to $2.2 billion in the third quarter of 2024 compared to the same period last year.

Talking at the earnings announcement in August, Disney's chief financial officer Hugh Johnston explained that "we saw attendance flat in the quarter" with a "flattish revenue number" forecast for the fourth quarter and a slowdown expected for "a few quarters."

This was reflected in Disney's third quarter earnings release which revealed that "the demand moderation we saw in our domestic businesses in Q3 could impact the next few quarters. While we are actively monitoring attendance and guest spending and aggressively managing our cost base, we expect Q4 Experiences segment operating income to decline by mid single digits versus the prior year." So although Disney's magic may be back at the box office, a happy ending for investors could still be far, far away.