Ben Gilbert: prediction

Transcript context

…Pixar. In 2006, Disney bought Pixar in a landmark $7.4 billion deal. I thought this one would be a lot higher, but we'd like to walk you through how we did the math on this. The absolute dollar return that we're looking at from a bunch of our estimates in this methodology is about $2.3 billion to Disney's market cap. The way we thought about that is Pixar is basically good for a film a year. As much as I wanted to do this by summing all of the profits or maybe abstracting one layer up and summing all of the revenues from all their films, really the right way to think about (especially as we're thinking about) contribution to market cap is how much revenue of Disney's annual revenue are they responsible for every year, which is effectively one film’s worth. Now, what is one Pixar film worth in revenue from it’s worldwide gross after release? It's about a billion dollars in the success case. You look at the Incredibles 2 or Toy Story 4, each brought in right around a billion dollars. Because of our Disney episode, we know that you make about twice as much from perks and merch as you make from the film itself, or at least the division as a whole does, so we felt it was reasonable to say triple the amount of money that any given film gets from the box office to its total revenue contribution to Disney, and you get about $3 billion. Contributing about $3 billion in revenue per year to Disney out of their close to $70 billion in revenue. You get to just under $10 billion in market cap contribution from Pixar. But of course, they paid $7.4 billion for it. When you net those two out, you get incrementally about $2.3 billion in market cap contribution from Pixar.…

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