Getting Dizzy Trying to Explain Why Disney Does What It Does

July 30, 2010 - PRLog -- Is all right in Disney World?

Following months of negotiation, Disney (DIS) has finally ridded itself of the albatross around its neck in the form of Miramax. If all albatrosses could prove to be as supportive as Miramax. Its stable of successes include Pulp Fiction (1994), Good Will Hunting (1997), and Chicago (2002).

Reports indicate that Disney opted to put Miramax up for sale for several reasons:

1)   It didn’t mesh with its renewed family-friendly image, which Marvel, acquired in late 2009, apparently does in spades, because nothing says family like Jessica Alba dressed in a tight leather outfit (Fantastic Four (2005)) or the decapitation-and-general-violence-filled Punisher: War Zone (2008). And I suppose Pixar’s Toy Story (1995) really isn’t a gigantic metaphor, detailing the plight of the poverty-stricken in societies over-ridden by capitalistic ideals. Yeah, right. We also all see through the homoerotic undertones of Buzz and Woody’s “friendship” too.
2)   Independent movies are not as popular as they once were, because the $44 million The Wrestler (2008) made at the box office only proves that the world loves watching middle-aged men in tights prance around the squared circle and the $55 million Milk (2008), a movie concerning the first openly gay politician to be elected into public office in Harvey Milk, made only reaffirms this fact, and the $46 million that Crazy Heart (2009) made was just a crazy aberration, and the $63 million that Precious (2009) made...

It’s fine that Disney has decided to sell one of its properties. Doing so is well within its rights, but to try and justify it through easily-pierced-through arguments to try and hide the fact that it just wasn’t worth it to them anymore kind of insults the general public’s intelligence. I mean, not to in turn insult the intelligence of Disney’s general target audience here, the segment of the population that pays attention to business news and reads up on investment opportunities is not exactly made up of six-to-twelve-year olds.

And while we’re being honest, let’s also agree that Disney is at least in part responsible for making Miramax as unprofitable as it supposedly is today. Miramax was founded in 1979 by Harvey and Bob Weinstein and sold to Disney in 1993, but the Weinsteins stayed on to manage the label up until they split in 2005. Under their watch, in the lead-up to their departure, Miramax came out with such critically acclaimed and relative financial successes as Finding Neverland (2004), Garden State (2004), and the Kill Bill movies. In contrast, in 2006, Miramax came out with such relative flops as Hollywoodland and The Hoax.

Now, I’m not out to argue that Disney ran Miramax into the ground, because if you look hard enough there can be a case made that Disney tried its best to save a production company that was hemorrhaging money (I mean, Miramax, after all, did release the horrifying-and-not-in-a-good-way Scary Movie movies, but, alas, even those made boatloads of green... money and barf).

It’s interesting to note that circa 2004 Disney and the Weinsteins were arguing over just how profitable Miramax was, with the Weinsteins claiming the company had made money in four of the previous five years and Disney saying it was actually two. The end result? The Weinsteins offered to purchase it back from Disney and Disney declined. Very telling, no?
The Weinsteins were even in negotiations to buy back the firm when Disney decided to put it up for sale recently, but their offer of $565 million was beat out by a $660-million bid made by a consortium of investors.

At the end of the day, considering Disney only paid $80 million for Miramax 17 years ago and the Weinsteins can afford to offer up over $550 million in 2010 for the same company, it is very clear that, if there were management problems, they weren’t the fault of the Weinsteins and that there is still a place in Hollywood for a company like Miramax, devoted to producing artsy, classy, and quality films (except of course the Scary Movie films).

When analyzing this move by Disney, at least on a skin-deep level, it doesn’t make any sense. Granted, financial data on the performance of Miramax isn’t readily available to me, but neither is data for Disney. For all we know, Disney can be one massively cash-strapped company on the verge of bankruptcy. Actually... as a publicly traded company, Disney is required to make available its financial statements, and, as such, it is easy to see the following:

1)   Total cash on hand for the latest quarter is just slightly lower than it was for the previous quarter at $3.08 billion from $3.20 billion.
2)   On an annual basis, Disney reportedly last had more cash and cash equivalents on its balance sheet, $3.42 billion, relative to the last reporting period ($3.00 billion), and significantly less net income ($3.31 versus $4.43 billion; $4.69 billion in the period before that).

As such, two educated guesses can be made... the need for cold hard cash was not a motivating factor behind the sale (as unlikely as it is that the deal to close by year-end will be financed completely through cash) and maybe Disney decided to get trigger happy at the first sign of a weakening bottom line. It’s not a bulletproof thesis statement by any stretch of the imagination, but you try explaining why a company led by a mouse, a duck, and whatever the hell Goofy is does what it does. Everything may not be alright in Disney World, but was it ever?

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