Lessons learned from two big Disney disappointments

And how the House of Mouse turns those moments into even bigger wins

After years of obsessively studying Disney, there are two movies I come back to time and time again when thinking about some of the company’s key strategic shifts: The Rescuers Down Under (1990) and John Carter (2012). 

Stay with me on this for a second. 

As I was reading through box office reports this weekend, and thinking about Cruella, Disney’s most recent live-action jaunt that received a simultaneous release in theaters and on Disney+ as a Premier Access title, I came back to these movies. Both represent times when Disney was on the precipice of significant cultural impact, but both are best remembered for their failure. 

Cruella is far from a failure. With a $27 million domestic box office weekend, solid Rotten Tomato scores, and pretty good critical response, Cruella is arguably one of the best live-action “adaptations” Disney has released in the last decade. It’s no Aladdin, but Disney wasn’t betting on Cruella doing those kinds of numbers — and it’s not exactly an adaptation. It’s an offshoot of a beloved Disney movie (101 Dalmatians) that expands the world of a popular piece of IP, built to satiate hungry consumers.

Instead, Cruella is arguably the best example of what Premier Access could benefit from going forward, and an example of learning from Disney’s more recent live-action ups and downs. It’s a movie that Forbes’ Scott Mendelson calls a “successful disappointment,” a term I love. Had Cruella been released in a non-pandemic year, without Premier Access, would it have been a success of a flop?

We don’t know really. But with Premier Access it exists beyond box office results, serving a different purpose and audience that Disney is trying to figure out and grow.

As Disney enters its next phase of film distribution, executives sitting in rooms determining what needs a theatrical release, what can skip theaters with a $30 price tag on Disney+, or what can stream for free to keep subscribers from bailing, examining what Disney learned from The Rescuers Down Under and John Carter is key to understanding its future.

Direct to VHS

The Rescuers Down Under was the first ever Disney Animation sequel, released under Disney’s new management — one that included former CEO Michael Eisner, former studio head Jeffrey Katzenberg, and former president Frank Wells, best known as the team that ushered in Disney’s Renaissance era. Released one year after The Little Mermaid, The Rescuers Down Under was arguably Disney’s first big attempt at playing around with and modernizing its own IP.

Katzenberg had big plans for The Rescuers Down Under at the time. Unlike its 1977 predecessor, the film wouldn’t rely on singing or other typical markings of a Disney film. Instead, it would be an action film, seemingly completely different from the movie before it, but based on a world of characters already within Disney’s vault. 

“I wanted to do an action-adventure movie, which Disney’s never done,” Katzenberg told the Chicago Sun-Times in 1990, as reported by Slash Film, coming off the success of The Little Mermaid and trying to make his mark on the company’s legacy. 

There were a lot of issues surrounding Katzenberg’s decision to release The Rescuers Down Under. Unlike other popular Disney films at the time, The Rescuers wasn’t a movie begging for a sequel. Audiences weren’t clamoring to sit in a theater and watch a somewhat-follow up to a movie from 1977. Franchises were still being developed in 1990, coming off a decade of massive blockbusters that sent people rushing to theaters, but The Rescuers Down Under wasn’t part of that mad rush. 

Add in that Disney released The Rescuers Down Under the same weekend as Home Alone — sandwiched between a packed holiday calendar that also included Child’s Play 2, Predator, and Rocky V — and it’s no wonder that the movie didn’t perform as well as Disney executives hoped. It wasn’t a miscalculation on perceived value, it’s that there was no real value to perceive compared to other titles fighting for people’s weekend time and dollars. The movie generated $27 million, opening to just over $3 million. The Little Mermaid grossed more than $6 million domestically in its opening weekend one year prior, and went on to earn nearly $90 million. 

The Rescuers Down Under didn’t work as a theatrical release, but it may have had more luck going straight to VHS, a strategy that executives employed just a few years later. I think of it as the perfect example of knowing the value of a single product within a shifting marketplace. The Rescuers Down Under wasn’t exciting enough to get people in theaters, not well known enough to generate lines at cinemas, but during the holiday season when families want something to watch at home, a new Disney VHS becomes the perfect option.

Direct to video stemmed from success Eisner and Katzenberg saw with its TV market, where Disney produced blocks of animated entertainment for families to enjoy on Friday nights. The Return of Jafar, the first direct-to-video sequel Disney released in stores, received the order because Katzenberg and the team were impressed with what they saw. Why throw Return of Jafar on television when families might buy the VHS?

The Chicago Tribune reported that Disney sold 15 million copies of Return of Jafar, bringing in more than $300 million. Considering that Return of Jafar only cost about $3.5 million to make — not even a sliver of the $28 million budget on the first film — it was a massive success. 

By 1994, there was a burgeoning audience of consumers who were buying and renting movies from Blockbuster and Wal-Mart that Disney could reach. Here are some interesting statistics from Mental Floss:

• In 1985, more than 15,000 rental stores operated in the United States

• By 1987, there were approximately 37 million VCRs in homes. 

• On average, people rented about eight movies a month in 1987 

• Most importantly, the price of VCR players dropped from $1,000 to between $150 and $400. 

Disney was one of the few studios who looked at the market and thought, “What if we priced our cassettes at a reasonable cost, and encouraged parents to buy movies for their kids, who could watch them for hours on end?” Home video eventually made up a large portion of many studios’ revenue by the mid-90s, according to Mental Floss. 

Under the banner, Disney released several “sequels” including Beauty and the Beast: The Enchanted Christmas (1997), Pocahontas II: Journey to a New World (1998), The Lion King II: Simba's Pride (1998), The Little Mermaid II: Return to the Sea (2000), and Cinderella II: Dreams Come True (2002). VHS eventually became DVD, which at the time allowed studios to “keep two-thirds of every dollar compared with only one-third for renting tapes,” according to Variety.

DVDs became the dominant form of home video entertainment, with 80 million players being sold by 2002, making it “the fastest-adopted consumer electronics device ever,” Variety adds. Wal-Mart and Target eclipsed Blockbuster as ownership and access became more affordable and convenient. 

Studios like Disney and Warner Bros. were all in. There were plans to develop more, but issues arose when Bob Iger took over for Eisner and acquired Pixar. John Lasseter, Pixar’s former chief creative officer who was ousted in 2018, reportedly didn’t like certain animated features being undercut by being seen as “direct to video.” More planned DTV sequels were canceled.  

All of this is key to understanding where we are now. Disney’s home movie market has once again become incredibly important, but it’s shifted to streaming and monthly recurring subscribers instead of fixating on selling physical copies of films. Like the VHS and DVD home market, there are still millions of people looking for something new to watch for a reasonable price seemingly all the time. Disney needs to satiate that demand, and will move former potential theatrical bets to do so. 

Much like Disney’s direct to video business after The Rescuers Down Under, Disney’s new era of “sequels” and spinoffs can learn from the past few years. Dumbo lost $160 million, Mary Poppins Returns basically broke even, while Maleficent: Mistress of Evil and Through the Looking Glass both saw more than 40% drops in profit compared to the first films. Christopher Robin lost more than $40 million, and Nutcracker saw a loss of just under $70 million. All were released before Disney+ launched.

As Lionsgate CEO Jon Feltheimer told analysts on a recent earnings call, every film becomes its own equation now. Would a movie perform better if it went straight to streaming or could it hold its own in theaters, where attendance was low even pre-pandemic despite ticket sales growing because certain movies bring people into theaters over and over again?

I’ve written about this before, but part of the reason this feels like a big deal is because it’s happening under a very public eye. Movies like Cruella, Raya and the Last Dragon, Soul, and Luca were supposed to be theatrical exclusives, but are now either hybrid releases or streaming only titles. Adding Black Widow and Jungle Cruise to the hybrid model (meaning both will hit theaters and be available on Disney+ for $30) either speaks to Disney’s hesitance that theaters will be back to 100% by the time they’re released this summer or, more intriguingly, Premier Access’ success.

But in a post-COVID world, films on the scale of Black Widow or Jungle Cruise will receive theatrical exclusivity. Streaming is never going to replicate the initial $800M - $1B+ revenue that blockbuster titles bring to studios. The Little Mermaid, Bambi, Hercules, and Lilo and Stitch are likely going to do well for Disney in a post-COVID world, too. Those films, actual adaptations of animated classics, will likely go to theaters as well.

All the other films? The ones that aren’t a new Marvel Studios production, the start of whatever Star Wars’ next trilogy is, a popular addition to a Pixar franchise, a live-action adaptation of a beloved classic — those will head to Disney+. We just won’t hear about the change. It’ll simply be announced as a Disney+ exclusive title. Everything becomes case by case.

Movies like The Rescuers Down Under will happen again. Disney likes to play in the sandbox. Cruella isn’t a 101 Dalmatians prequel per se, but it’s a movie that plays on a popular character and allows fans to return to that world once more. Cruella might not be the type of movie to get people into theaters; especially families with kids who are still unvaccinated because of regulations. It is the type of movie, however, that for $30 goes a long way. And that’s what Disney is banking on once again, much like executives did with Return of Jafar in 1994. 

Big failures, big franchises

What does any of this have to do with John Carter? 

Released two decades after The Rescuers Down Under, John Carter is best remembered as one of Disney’s biggest failures. Ouch. Disney lost more than $200 million on its big Avatar-chasing epic. John Carter had no major star power, was based on a 1917 science fiction story that had no real mainstream resonance and, bottom line, the story sucked. Disney, hot off a Marvel purchase, wanted to create a new live-action franchise to compete with, well, everyone else’s franchises. 

It was a time of change for the Walt Disney Studios team. Dick Cook, who had overseen Walt Disney Studios as chairman from 1996 through 2009, was replaced by Rich Ross, one of Disney’s most prolific television executives. Up until John Carter, Ross was best known for his work turning the Disney Channel into a generation-defining network, overseeing a period where shows like That’s So Raven, Hannah Montana, Suite Life of Zack and Cody, Kim Possible, Wizards of Waverly Place, and Sonny with a Chance premiered. Ross also oversaw Disney Channel original movies, the most famous being High School Musical and Camp Rock.

Ross was, by all accounts, Iger’s guy. While Iger was dealing with former Marvel Studios head Ike Perlmutter, a famously contentious relationship, Ross was brought on as the new Walt Disney Studios chairman. There were some ups — Pirates of the Caribbean: On Stranger Tides and Alice in Wonderland both excelled at the box office — and there were lows. The Lone Ranger, Oz the Great and Wonderful and, of course, John Carter were either failures that caught Disney executives red faced in the trades or soft successes at best. 

This probably feels like a lot of background, but poor management, disastrous lack of communication, clashing of guards (those from the Eisner era and those coming in with Iger), and lack of oversight are part of what led to John Carter becoming a disastrous flop. But it was also in part because Disney executives believed that they could manufacture a franchise simply because it was a) some form of IP and b) they were Disney. 

Disney learned that building franchises people really, really love — and will repeatedly spend more than $1 billion collectively to see — was pretty difficult. There was luck with Pirates of the Caribbean, but many of the big wins weren’t certifiable franchises. If John Carter didn’t work, good luck getting people into theme parks for a John Carter attraction or buying John Carter merchandise.

It wasn’t just John Carter. 2010’s Alice in Wonderland performed exceptionally well, bringing in more than $1 billion globally, but its 2016 sequel failed to connect. Tron might have a dedicated fan base, but Legacy failed to be a breakout. Disney kept trying to turn its IP into a Harry Potter, Lord of the Rings, or Star Wars, but didn’t quite find the same success. 

So, in late 2012, Disney bought Star Wars.

I am once again going to cite Matthew Ball, one of my favorite analysts on the subject, who summed it up beautifully: 

The evolution of Disney’s IP strategy under Bob Iger is similarly instructive. The first half of Iger’s tenure focused not just on tentpoles like Toy Story, Cars and Marvel, but also producing new blockbuster franchises or renewing IP that had been dormant for decades or longer. This included Tron Legacy, Tomorrowland, John Carter, The Lone Ranger, Oz the Great and Powerful. These titles were infamous box office bombs at their worst, and barely profitable at best. 

This, in turn, led Disney to refocus on expanding and developing franchises that already had a substantial level of love, rather than just awareness (note, too, that after de-canonizing the Star Wars Expanded Universe, Disney is now recanonizing much of it). If you believe that the media industry has, until recently, deeply undervalued IP, then the valuations for beloved IP represented utter market failure.

The Marvel Cinematic Universe (MCU) isn’t a success because there are explosions, fights, hot actors, and cool technology. That’s helped the franchise’s success, to be sure, but the MCU at its core is a 23-episode “found family” story. The MCU is beloved because its characters, world, and stories resonate with people beyond the screen.

It’s popular for the same reason that people love Grey’s Anatomy, Criminal Minds, Supernatural, Harry Potter, Lord of the Rings, Star Wars, and all the rest. Disney spent so much on trying to make John Carter look like the type of movie that people would be rushing out to see that no one — again, due to all the aforementioned key management issues — stopped to ask, “Is this movie something people are going to connect to beyond the monsters?” 

As I tweeted yesterday after it was revealed that Netflix spent $200 million on Jupiter’s Legacy only to cancel it after one season, spending that kind of money on a “show that might work because it kind-of-sort-of looks like a show that should work is wild. Lord of the Rings it is not."

“Not to bring up John Carter again, but it's like dropping $300M on a film that might work because it kind-of-sort-of looks like one that should work.”

A new movie with no compelling storyline that cost roughly $300 million to make, and without A-list actors (sorry to all Taylor Kitsch and Friday Night Lights fans) to act as the face of a burgeoning franchise isn’t great. As Mendelson wrote at the time, “It was only after [Fellowship of the Ring] became a monster hit that New Line gave Peter Jackson and company extra money to play around on the next two films, culminating in a now-quaint $150 million budget for The Return of the King.” 

Even known IP doesn’t always guarantee success. Under Alan Horn and Sean Bailey, Disney started to remake some of its classic animated films to varying degrees of success. Now, with Disney+, Disney is looking to explore those worlds once again, creating what I like to refer to as the “Walt Disney Studios Extended Universe.” These are films that feature characters and settings we know, and in part exist to remind people about everything Disney has, but exist within their own right; not to become a cinematic universe that drives people out to theaters every three months, but to keep Disney’s IP top of mind.

The reality is that Disney doesn’t need Cruella or Peter & Wendy to make $500 million — although CEO Bob Chapek certainly wouldn’t turn it away. Marvel, Star Wars, Princess, Pixar, and more guaranteed live-action bets (like The Little Mermaid and Lilo & Stitch) should do what the company needs them to do theatrically. What Disney needs live-action and animated continuations to do is expand the universe, and help keep people sitting around the campfire, excited to hear about what happens next.

Playing in a sandbox that people know, but understanding that audiences will likely pick a new James Bond movie over an experimental live-action spinoff, means Disney can spend much less because it’s going directly to Disney+. The likelihood of long term profit (subscription revenue through net adds and reduced churn) compared to immediate box office loss grows. Jennifer Salke, the head of Amazon Studios, noted in a conversation with The Hollywood Reporter that Late Night bombed at the box office, but became one of the most watched shows on Amazon Prime Video. Same movie, two vastly different perceived value points.

Peter & Wendy isn’t The Lion King, but as a Disney+ exclusive title, it has a much different role to play for the company. John Carter could have been a $75 million movie that brought people into Disney+ and found an audience there where the risks aren’t as high. Everything is perceived value.

Cruella was never going to be a $1 billion movie. That’s okay. Cruella found its place within the Walt Disney Studios Extended Universe, reimagined a classic character in a classic tale and, possibly, gave Disney some relatively good revenue via Premier Access. (Not that we’ll ever know, of course). Cruella, as Mendelson put it, is a successful disappointment — much better than The Rescuers Down Under and John Carter, which were simply disappointments. Sometimes, however, it’s lessons from the disappointments that lead to some of Disney’s most prosperous moments.

Remember, it doesn’t have to be a box office sensation if it’s helping to make Disney+ feel like a necessity. Collecting $50 million globally right now when people want to get back to theaters is great. But when there are four Marvel movies a year, princess installments, Pixar sequels, and Star Wars all over the calendar, Disney needs to remember its home entertainment market and the potential for loss.

It’s here, in the middle of the Venn Diagram between potential for box office flops and an insatiable, demanding at-home audience, where the Walt Disney Studios Extended Universe can thrive.