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Happy Ending: Disney Rebounds with 2 Hits

Scott Eden

After two quarters of rough going in which its movie studio has barely earned out, Disney(DIS Quote) appears to be rebounding at the box office on the back of two hits.

First, there was the Pixar animated feature Up, a developing blockbuster that debuted in U.S. theaters May 29 and has so far notched total receipts of $224 million, making it the second highest-grossing film of the year, behind Paramount's Star Trek. (Paramount is owned by Viacom(VIA Quote).)

It's hardly surprising that Up has done so well. Since the film premiered at Cannes earlier in May, Disney and industry pundits had been confident that it would become yet another Pixar money engine. (Disney bought the computer-generated animation studio for about $8 billion in 2006.)

Up's budget has been reported at about $175 million, not including marketing costs, which means that the film has likely closed in on black ink after only three weeks in theaters. If Up does as well as its Pixar predecessor, WALL-E, which cost about the same to produce, it will take in more than half a billion dollars globally.

More recently, over the June 19-21 weekend, Disney's Touchstone unit released The Proposal, a warmed-over, formulaic romantic comedy starring Sandra Bullock, which nevertheless brought in a surprising $34 million over those three days -- making it the top grosser in North America, and beating out The Hangover, a sleeper hit released by Time Warner's(TWX Quote) Warner Brothers unit. The strong showing would seem to guarantee at least a decent profit for the Bullock vehicle, which cost a reported $40 million to make.

Disney of course hopes the hits will continue: later this year, the company will re-release as a double bill the first and second installments of the popular Toy Story series and, in the 2010, a Tim Burton-Johnny Depp production, Alice in Wonderland (with Depp as the Mad Hatter, obviously), as well as a third Toy Story picture.

The results must come as a relief to studio chieftains at Disney, who had gone into full cost-containment mode after a string of disappointing fare, even as budgets had grown bloviated. Among the flops were Bedtime Stories, Confessions of a Shopaholic and Jonas Brothers: The 3D Concert Experience. Disney CEO Robert Iger, talking to analysts and investors on its first-quarter earnings call the first week of May, had vowed to "address costs at every level" inside the company's film operations.

And when a company announces that, it's time to hoard the toilet paper.

In the first quarter, Disney's studio operations posted a profit of just $13 million, 97% lower than the year-ago period, when, to be fair, several big-grossers (including one in the Hannah Montana franchise of tween blockbusters) made comparisons tougher than they otherwise would have been.

But it had been the second-straight period of disappointing movie slates for Disney. A quarter earlier, the studio's operating income had fallen 64% from a year ago. As at all movie-production companies, weakening DVD sales amid competition from digital downloads has also hurt the company's results.

Disney will report its fiscal third-quarter results on July 30.