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This Media Stock Got Shot in The Foot by The Lone Ranger

Lawrence Lewitinn
Talking Numbers
This Media Stock Got Shot in The Foot by The Lone Ranger

The Lone Ranger opened this week, disappointing the box office. Will Disney’s stock be a disappointment, too?

Disney’s “The Lone Ranger” is on track to being the company’s biggest flop since the Carter Era – that is, the “John Carter” Era.

The Mouse House spent $225 million on the Western, released yesterday. The reviews were almost as disappointing as the film’s box office numbers, which came in at $11.7 million. The company estimates the film’s holiday weekend take at $45 million, about $20 million less than what was originally expected.

One film’s bad box office can have some serious effects on a company’s bottom line. Disney should know because last year, its Studio Entertainment segment pinned a $161 million loss on the film “John Carter”, a film which cost $250 million to make. That loss made the whole segment unprofitable by $84 million for Disney’s 2012 second quarter, though the film did eventually make back its initial investment.

It’s not the first time the Lone Ranger fell off his horse. As Hollywood’s bible Variety points out, the 1981 film version of the “The Lone Ranger” cost $18 million but grossed $12.6 million. Even then, the franchise wasn’t exactly a hot commodity. The last episode of the “The Lone Rangers” TV series was produced in 1957, though it survived in reruns decades after.

Now more than a half century after the Lone Ranger kicked up his spurs, most children’s parents have little attachment to the masked man or Tonto the way their grandparents had. Disney had to reintroduce a new generation to the franchise but it seems it fell short.

The $225 million that it cost to make “The Lone Ranger” may seem like a rounding error for Disney, a company which had revenues of $42.3 billion and profits of $5.7 billion last year. However, do mediocre returns say something about Disney’s ability to pick and market hits going forward?

We talk numbers with CNBC contributors Abigail Doolittle, Technical Analyst at The Seaport Group, and John Stephenson, Portfolio Manager at First Asset Investment Management on if the Lone Ranger just shot the Mickey Mouse in the foot.

To hear Doolittle and Stephenson analyze Disney, watch the video above.

[Disclosures: First Asset owns shares of Disney's stock.]


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