Disney’s $300 Million Bet To Tempt Back Cinemagoers

Ahead of its first quarter earnings release today, Disney has revealed that it has shelled out $294.7 million (£244.1 million) on making the latest instalment in the Indiana Jones series in a bid to tempt movie fans back to cinemas this year.

Indiana Jones and the Dial of Destiny will be released in June and will be the fifth time that 80-year-old Harrison Ford has played the whip-cracking adventurer created by George Lucas in the 1970s. John Rhys-Davies returns as Indy’s sidekick Sallah, with new cast members including Phoebe Waller-Bridge, Mads Mikkelsen, Thomas Kretschmann, Toby Jones, and Antonio Banderas.

It will be the first Indiana Jones movie which hasn’t been written by Lucas. In 2012 he sold his Lucasfilm company for $4 billion to Disney which put Oscar-nominated director James Mangold in charge of the new flick. He has his work cut out for him.

The previous instalment, 2008’s Indiana Jones and the Kingdom of the Crystal Skull, was critically panned and it is even harder for cinemas to get people through their doors now. When the curtain temporarily came down on cinemas during the pandemic people got their movie fix from streaming services and became hooked. Since cinemas have re-opened, their occupancy has been anything but blockbuster.

Estimates from film industry analysts Gower Street Analytics show that last year the global box office hit $25.9 billion, which was a 27% increase on 2021 but 35% down on the average for 2017, 2018 and 2019, the last three pre-pandemic years. It fueled the collapse of the US operations of the world’s second-largest cinema chain, Cineworld. Weighed down by $8.9 billion of debt and lease liabilities, the US arm of the London-listed company filed for bankruptcy protection in September. Two months earlier, Europe’s biggest privately owned operator, Vue, resorted to a debt-for-equity swap to stay afloat. More dark clouds could be on the way.

Although Gower Street Analytics forecasts a $3.2 billion increase in global box office revenue to $29 billion in 2023, this rise is still almost a third less than the average of 2017 through 2019. In contrast, streaming services are still on a tear even though the pandemic has receded and purse strings have been pulled tight in the cost of living crisis.

Last month the Digital Entertainment and Retail Association reported that revenue from streaming subscriptions in the UK rose by 17.6% in 2022 to $4.6 billion (£3.8 billion), double the entire amount made from the sale of music. According to media regulator Ofcom, most popular platform in the UK is NetflixNFLX
which last month announced that it had smashed its own estimates by adding 7.7 million net new subscribers in the fourth quarter of 2022 giving it a worldwide total of 230.8 million worldwide.

It is still topped by Disney’s global total of 235.7 million though that is only the start of the story. The Mouse’s flagship Disney+ streaming service hasn’t turned a profit since it launched in 2019 and in November its chief financial officer Christine McCarthy forecast that its first profitable quarter would be in the 2024 fiscal year. In order to achieve this it launched an ad-supported option in December but it isn’t putting all its eggs in one basket.

Disney is also trying to tempt movie fans back to the cinema and is wheeling out the big guns to do it. Data from industry analyst Box Office Mojo shows that the Indiana Jones franchise has grossed a total of $1.4 billion. More than half of it was generated by the Crystal Skull which benefited from higher cinema ticket prices as it was released 19 years after its predecessor. The Dial of Destiny has the potential to punch even higher than that.

When the first trailer for the movie was released in December its scenes of a de-aged Harrison Ford on a train took the internet by storm. The Dial of Destiny was shot at Pinewood Studios just outside London and on location across the UK. The train chase was filmed on the North Yorkshire Moors Railway in northern England whilst London’s Hatton Garden diamond district doubled as New York City and Glasgow in Scotland was the location of a 1969 ticker tape parade celebrating the return of the Apollo 11 astronauts. It shines a spotlight on the finances of the film.

Movie budgets are usually kept a closely-guarded secret as studios tend to absorb the cost of individual pictures in their overall expenses. However, the costs of movies made in the UK are consolidated in single companies which file annual financial statements. This helps them benefit from the UK government’s Film Tax Relief scheme which allows production companies to claim back up to 25% of their costs in Britain.

The production companies have code names so that they don’t raise attention when filing for permits to shoot off-site. The Disney subsidiary behind the Dial of Destiny is PLT Productions (UK), which is named after the Phoenix Little Theater which, in 1964 hosted the premiere of Firelight, the first film made by Steven Spielberg who directed the first four Indiana Jones movies.

As we reported in the Express, PLT’s latest financial statements were filed in September and show that the UK government paid it $44.7 million (£37 million) during the 10 months to 1st April 2022 following a payment of $10.9 million (£9 million) in the previous 13 months when filming began. A further $0.2 million (£0.2 million) was paid prior to that bringing its total tax credit to $55.8 million (£46.2 million).

According to the financial statements, PLT’s total costs come to a staggering $294.7 million (£244.1 million) and even though production was delayed repeatedly due to Covid, “the final cost was forecasted to be in line with the adjusted production budget.”

It has had a magic touch as the latest set of financial statements reveal that the 433 production staff who worked on the film were paid $20.4 million (£16.9 million). That doesn’t include the $4.6 million (£3.8 million) that the production staff received in the previous period or the payments to freelancers and self-employed workers who make up the majority of the crew.

However, the plight of cinemas raises questions over whether UK taxpayers’ cash would be better spent on stricken local companies than profitable foreign studios, especially at a time of rising rates. “With the UK already established as a prime location to shoot movies, the case for the film tax credit holds no water when hardworking taxpayers are expected to bare the full brunt,” says a spokesperson for pressure group the TaxPayers’ Alliance. “It seems deeply unfair that thriving film studios are given substantial tax breaks.”

In the year to 1 October 2022 Disney’s media and entertainment division generated $4.2 billion of operating income on $55 billion of revenue. Its results today are for the company’s first quarter under Bob Iger who became Disney’s chief executive for a second time in November last year when previous incumbent Bob Chapek was fired. Iger now has to contend with activist investor Nelson Peltz of Trian who has criticised the lack of profits generated by Disney+ and is angling for a board seat. Investors will have to wait until Disney’s annual shareholder meeting on April 3 to find out whether his wish is granted.