‘Oz’ Puts Disney Film Strategy to Test With Updated Classic

Hollywood may finally have found a successful way back to Oz.

Walt Disney Co. (DIS)’s “Oz the Great and Powerful,” opening in theaters today, marks the latest attempt to reimagine the classic story from L. Frank Baum, seven decades and two flops after the 1939 classic. Projections have risen on positive social-media buzz, with Boxoffice.com increasing its estimate for U.S. weekend tickets sales by 17 percent to $75 million.

“Oz” is also the biggest bet yet on Hollywood’s strategy du jour -- mining famous tales to create new stories with modern special effects and humor. Studios have released more than a dozen such films in the past three years, with Disney’s 2010 “Alice in Wonderland” the most successful. Chairman and Chief Executive Officer Robert Iger is leaning on characters known to fans worldwide through books, movies or comics to generate higher profit from his volatile film division.

“Disney seems to be collecting every myth, legend and fantasy in the Western world with Marvel, the Muppets, Winnie the Pooh and Star Wars,” said Jonathan A. Kuntz, a film historian at the UCLA School of Theater, Film and Television. “It’s no surprise they’ve grabbed onto ‘Oz.’”

The strategy can pay off when a film clicks with fans. Barton Crockett, an analyst at Lazard Capital Markets who recommends Disney stock, estimates the picture will generate about $400 million in worldwide ticket sales and about $200 million in home-video revenue.

“If it has stronger international box office than domestic, an increasingly common occurrence with big event movies like this, the movie could become nicely profitable,” Crockett said.

Film Cost

With a budget of about $225 million, the new “Oz” cost more than “Alice” and “The Hobbit: An Unexpected Journey,” based on estimates for those earlier films from IMDB.com and Box Office Mojo, two industry websites.

SNL Kagan, which assesses film profit prospects based on production budgets, marketing costs and estimates of revenue, said Disney will make profit from “Oz.”

The movie probably will fall between “Alice,” which had $334.2 million in domestic sales, and “The Chronicles of Narnia: The Lion, the Witch and the Wardrobe,” which tallied $292 million, SNL Kagan said today in an e-mailed report. “Alice” scored 3.21 on the Kagan Profitability Index and “Narnia” 3.11. Films exceeding 1.75 generally make money.

Family Films

“Oz” fits neatly into Burbank, California-based Disney’s strategy of releasing family friendly films based on established brands. The studio lost $200 million last year on “John Carter,” a movie based on a lesser-known book series from Edgar Rice Burroughs, the creator of Tarzan.

The new “Oz” features James Franco as Oscar Diggs, a circus con artist who gets caught in a tornado that delivers him to that magical land. There he matches wits with an evil witch played by Rachel Weisz. The film is directed by Sam Raimi, whose three Spider-Man films for Sony Corp. (6758) grossed a combined $2.5 billion worldwide.

Exhibitors were skeptical of “Oz” a year ago at an industry convention, saying the film “seemed a little talky without much action,” according to Matthew Harrigan, a Wunderlich Securities analyst in Denver who has a hold rating on Disney stock.

“They are now very upbeat,” Harrigan said.

International Role

That should ward off comparisons with ‘Jack the Giant Slayer,’’ last weekend’s Warner Bros. release based on the classic children’s tale “Jack and the Beanstalk.”

That film, produced at a cost of about $200 million, collected $27.2 million in its U.S. debut, with the studio, a division of Time Warner Inc. (TWX), now counting on international ticket sales and home video to take up the slack.

“Internationally, we’ll do very well,” said Jeff Goldstein, Warner’s executive vice president of domestic distribution.

“Oz” producer Joe Roth, a former chairman of Disney’s studio, also cites a growing foreign market for U.S. films. He’s produced three reimagined classics, including “Alice” and “Snow White and the Huntsman,” and is working on “Maleficent,” based on the villain from Disney’s animated feature “Sleeping Beauty.”

“Five years ago you wouldn’t have a movie released in China or you wouldn’t collect a nickel out of Russia,” Roth said in an interview last year with Bloomberg Television. “And these are gigantic markets that are coming on board.”

Oz History

The name Oz is no guarantee of success. In 1985, Disney released “Return to Oz” to domestic box office sales of $11.1 million, according to IMDB.com. That was less than half the $25 million production budget. Universal Pictures produced “The Wiz” with Michael Jackson and Diana Ross in 1978. The $24 million movie took in $13 million from U.S. theaters.

The new film hasn’t won over critics. “Oz the Great and Powerful” earned a rating of 44 out of a possible 100 at Metacritic.com, a website that aggregates published reviews.

Disney is marketing “Oz” heavily, running interviews with the stars on the otherwise ad-free Disney Channel and sneak previews at its California Adventure theme park. The company closed Hollywood Boulevard for the premiere, erecting a big balloon evoking memories of the 1939 film.

Warner Bros. will release a 3-D conversion of the original “The Wizard of Oz” this year to commemorate the 75th anniversary, Ronnee Sass, a studio spokeswoman, said in an interview. The picture also will be available on Blu-ray disc and in digital formats, she said.

Film Slate

Disney rose 1.9 percent to $57.39 at 4 p.m. in New York, a new closing high. The stock has gained 15 percent this year, compared with 8.8 percent for the S&P 500 Index.

The company will release 10 movies in 2013. That compares with 38 a decade ago, according to researcher Box Office Mojo. Of the 10, two are Marvel sequels, two are Pixar spinoffs, and two, “Oz” and “The Lone Ranger,” resurrect well-known tales.

Since purchasing Pixar, Marvel and Lucasfilm Ltd. for a combined $15 billion in the past seven years, Iger is limiting his releases largely to those familiar nameplates, and Disney’s own label.

“In a sea of unbelievable choice, relentless choice, I do think that you have some advantage if you’ve got a good brand,” Iger told the Hollywood Radio & Television Society in January. “Our film strategy has largely evolved to basically branded films, franchise, branded films.”

To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net; Michael White in Los Angeles at mwhite8@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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