Disney in Denial; Part 4; Disney's Declining Customer Engagement
This is the fourth in a series of posts regarding missteps taken by The Walt Disney Company. You can navigate to Part 3 here.
Customer satisfaction matters. Customer engagement can matter more. For Disney, PIXAR, and Lucasfilm movies over the past fifteen years, each additional IMDB rating point has translated to an extra $60 million in US box office revenue. Since US revenues generally contribute around half of total revenue, each point is likely worth well over $100 million in worldwide receipts.
To see these results clearly, one has to disentangle customer satisfaction from customer engagement. Customer satisfaction tells us how much the audience liked a film. Customer engagement gauges the size of the audience motivated to see the film based on their past experiences—not necessarily the current offering.
Customer engagement in this context is an amalgam of a person’s general interest in a film's genre coupled with their past experiences and current impression of the company that made it.
One way to think about customer engagement is by reference to the size of a film’s audience over its opening weekend. These are the customers interested in seeing the movie almost irrespective of how good it is.
In contrast, the impact of customer satisfaction largely plays out after the opening weekend. This is the period of a film’s release where word-of-mouth plays an outsize role.
The chart above demonstrates the strong relationship between a film’s satisfaction and its multiple (receipts after opening divided by the opening weekend receipts).
The relationship between satisfaction and a film’s opening weekend receipts is much weaker, as the chart below demonstrates.
Looking at the data in this chart, Winnie the Pooh didn't score much differently than Monsters University which didn't score much differently than the live action version of Beauty and the Beast--but the size of the engaged audience was much different for these films. Beauty and the Beast pulled in over 10 times as much revenue in its opening weekend than Winnie the Pooh did!
Why? Despite being part of a beloved franchise, Winne the Pooh, appeals to a much narrower audience than the vast majority of Disney storylines. A Pooh film can only make so much money, no matter how good it is.
As I mentioned above, a point of extra satisfaction can yield an extra $100 million in worldwide receipts, but customer engagement matters even more than that. Data from 32 films are shown in the above two charts: 15 are remakes or sequels, 17 aren’t.
The audience scores for the remake/sequels were 0.19 points lower than the non-sequels. If customer satisfaction dominated, then the sequels would have made slightly less money than the non-sequels, but that’s not the case at all. The sequels made $250 million more per film!
That's why studios produce so many sequels. It’s a lot easier to sell to an audience that’s already engaged with a film’s characters and story than it is to introduce them to a whole new set of characters. Unfortunately, for Disney, over the past couple of years, the opening weekends for its sequels and non-sequels alike have underperformed.
Indiana Jones and the Dial of Destiny, released today, will no doubt continue this trend of underperformance. Its 3-day opening weekend is projected to be just $60 - $77 million. That's significantly below the $100 million earned by the prior installment in 2008 even before adjusting for inflation. I'm sure I'll post more about that over the next few weeks.
The next post in the series is available here.