Disney Shareholders, It’s Time to Embrace Sequels

There are many insights to be drawn from Walt Disney’s (NYSE: DIS) recent fiscal third-quarter report, which, despite its overall positive tone, was not well-received by the market. One specific aspect worth discussing is Disney’s continued success with sequels. While some fans may roll their eyes at this trend, it’s something that should energize shareholders.

Disney has achieved notable success in May, June, and July by releasing the highest-grossing films each month: Kingdom of the Planet of the Apes, Inside Out 2, and Deadpool & Wolverine, respectively. This rebound in the studio’s performance stands out after a lackluster 2023. However, an interesting note is that all three top-performing films are sequels.

Many loyal fans, myself included, are often drawn to original stories with new characters. These fans appreciate new rides or attractions that are not based on existing intellectual property. But, the reality is that well-crafted sequels—rich in nostalgia—tend to sell exceptionally well.

Looking beyond the past few months, Disney’s top-performing films over the last decade all share something in common: they are either sequels or remakes. Each of these films has generated at least $1.4 billion in global box office sales. In fact, the trend extends to the 11 highest-grossing Disney films over the past 11 years. This consistent performance demonstrates how effective Disney is at bringing familiar characters back to the big screen, capturing audiences who have grown up with these beloved stories.

While Disney does produce original content between its sequels, the introduction of new stories occasionally turns into future multi-film franchises. The success of Moana, introduced nearly eight years ago, bodes well for Moana 2, which is set to premiere later this year. Shareholders will likely find much encouragement in this trend.

Image source: Getty Images.

Take this summer’s release of Inside Out 2, for example. The film has already surpassed expectations, grossing over $1.5 billion worldwide and becoming the highest-grossing animated film of all time. To reach this milestone, it had to outperform every animated feature that came before it.

Disney also shared that the original Inside Out, released in 2015, has seen a surge in popularity on Disney+, with 100 million views since the trailer for Inside Out 2 was revealed. The company estimates this has resulted in over 1.3 million new subscriptions to its streaming service.

Disney’s decision to raise prices across its streaming platforms this week, despite having focused on cost-cutting over the past year, ties into the growing value of its digital library. Each new sequel not only brings audiences back to theaters but also drives them to revisit the original content on Disney+. Consider Deadpool & Wolverine, which set a record for the biggest opening weekend for an R-rated movie last month. Fans are likely spending considerable time exploring the references and source materials from the Marvel universe featured in the film.

Disney’s strategic approach appears sound. Upcoming releases like Moana 2 and Mufasa: The Lion King, which will arrive shortly after, are not likely to disappoint at the box office. Disney’s track record suggests that an original hit can effectively set the stage for a successful sequel, keeping audiences engaged and shareholders satisfied.

Source: The Motley Fool