(Bloomberg) -- Walt Disney Co.’s fabled film studio, thanks in part to the Pixar hit Inside Out 2, is roaring back to life — and poised to report its first quarterly profit in over two years.
Analysts surveyed by Bloomberg News forecast the division that includes theatrical movies will post a profit of about $78 million when Disney reports fiscal third-quarter earnings on Aug. 7, the first positive result since the three months ended in April 2022.
The return to profit suggests Chief Executive Officer Bob Iger’s efforts to revive the film division are starting to pay off. After returning as CEO in November 2022, he cut the number of pictures Disney makes and delayed others, saying publicly the company needed time to improve its storytelling.
That coincided with a wider austerity drive at the company, which was struggling to profitably adapt to the growing popularity of streaming. Since the pandemic and two strikes that shut down Hollywood last year, Iger has eliminated more than 8,000 jobs and cut more than $7.5 billion in annual expenses.
On Friday, Disney updated its upcoming film schedule to remove an untitled Marvel film originally due in 2026. It also announced release dates for 11 movies in 2027, all of them as yet untitled. The 2027 lineup includes two Marvel movies and one from Pixar.
The latest quarter’s results benefited from the May release of Kingdom of the Planet of the Apes and the first two weeks of ticket sales for Inside Out 2 after its release in mid-June. They follow a string of high-profile failures including Strange World, Pixar’s Lightyear, Marvel’s Ant-Man and the Wasp: Quantumania, Haunted Mansion, Wish and Indiana Jones and the Dial of Destiny.
Disney was Hollywood’s highest-grossing studio by a wide margin from 2016 to 2019 on the strength of hits like Avengers, Black Panther and Star Wars. The title went to Comcast Corp.’s Universal Pictures in 2023 following that company’s success with blockbusters including The Super Mario Bros. Movie and Oppenheimer.
Rivals including Paramount Pictures, Warner Bros. and Sony Pictures have also performed well in recent months, powered by titles including A Quiet Place: Day One, Dune: Part Two and Anyone But You.
In the wake of Disney’s misses, Alan Bergman, who has been sole head of the film business since 2021, told employees at a town hall in November that Inside Out 2, Marvel’s Deadpool & Wolverine, and Alien: Romulus would power the division back to health.
Inside Out 2, with $1.52 billion in ticket sales so far, has become the highest-grossing film in Pixar’s history, while July’s Deadpool & Wolverine marked the biggest opening weekend ever for an R-rated picture and has since grossed more than $630 million globally.
“Disney has done an incredible job repositioning some of its most valuable franchises,” said Rich Gelfond, chief executive officer of Imax Corp., which has contracts to play several of Disney’s big-budget releases this year on its giant screens.
Although smaller in revenue than other Disney divisions, the film studio is arguably the most important, developing characters and stories that inspire consumer products, theme parks, cruises and shows on the Disney+ streaming service. It generated $3 billion in profit in fiscal 2018.
Not all of Disney’s pictures in the past two years have been misfires. James Cameron’s Avatar: The Way of Water, released in 2022, became the third-highest grossing film in history with $2.32 billion in ticket sales. James Gunn’s Guardians of the Galaxy Vol. 3, released last year, delivered almost $846 million in global box-office sales.
The “fewer but better” mantra that now guides Disney will reduce the movie output by some of its franchises for years to come. Iger has delayed some pictures by as much as three years through 2031 to ensure quality control. He pulled back on the volume of Marvel films in particular to avoid overburdening audiences, aiming to make two annually instead of four.
The Burbank, California-based entertainment giant may have another success in the next Alien horror film, which Boxoffice Pro estimates could open to as much as $50 million in weekend ticket sales in the US and Canada later this month. Two animated sequels that are due out this year — Moana 2 and Mufasa: The Lion King — also look promising.
Beyond the studio’s performance, Disney’s report next week will also shed light on the progress on Iger’s other priorities, including boosting sales at its parks as demand slows from a post-pandemic peak, and achieving profitability in streaming by the end of the company’s fiscal year.
(Updates with changes to film slate in fifth paragraph, latest box office for ‘Deadpool & Wolverine’)
©2024 Bloomberg L.P.