Disney’s live-action adaptation of ‘The Little Mermaid’ has become a focal point for discussions concerning contemporary film economics, revealing a complex financial landscape that extends beyond initial box office receipts. Analysis of recently released filings indicates that the film, a remake of Disney’s acclaimed 1989 animated classic, incurred significant costs, with spending surging to $355.1 million (£270.6 million).
This substantial expenditure exceeded the movie’s production budget, contributing to an estimated $4.9 million loss for Disney at the box office last year. The original 1989 cartoon, celebrated for its score and the iconic song ‘Under the Sea,’ garnered two Academy Awards, setting a high bar for its live-action successor.
The remake, starring Halle Bailey in the title role, heavily relied on computer-generated characters, a factor that significantly contributed to its colossal production cost. Filings covering the period up to August 31, 2023, three months post-release, reveal intensive work on visual effects, with $35.4 million (£27 million) allocated during the year preceding the movie’s theatrical debut.
Despite this investment, the visual effects drew considerable criticism, particularly regarding the “eerie appearance” of the undersea creatures. Vox articulated this sentiment, noting, “There’s something about these depictions that triggers an uneasy response,” further elaborating on the unnaturally contorted mouths and a perceived “sinister hiding underneath the computerized animal skin.”
These computer-generated characters, crafted by British visual effects firm Framestore, were unable to replicate the charm of their animated predecessors, which contributed to the original’s status as a fan favorite. This reception played a role in the film’s critical score of just 67% on Rotten Tomatoes, a stark contrast to the audience score of 94%.
While audience reception was more favorable, it did not translate into a blockbuster financial performance. Disney reported a global box office gross of “$570 million,” a respectable sum yet significantly less than the $1.7 billion achieved by its live-action version of ‘The Lion King’ in 2019 or the $1 billion garnered by ‘Aladdin’ in the same year.
Industry convention dictates that studios typically receive around half of the theater takings, with exhibitors retaining the remainder. This understanding is supported by film industry consultant Stephen Follows’ 2014 analysis, which, based on interviews with 1,235 film professionals, concluded that studios, on average, receive 51% of gross takings.
Applying this model, Disney’s estimated share from ‘The Little Mermaid’s’ box office stands at approximately $285 million. This figure, when juxtaposed with the substantial production costs, highlights the significant financial challenge posed by the movie’s “outlandish effects.
Disclosing movie budgets is an unusual practice for studios, as their financial statements typically aggregate costs across all productions. However, films produced in the United Kingdom present an exception, with ‘The Little Mermaid’ being one such instance.
Studios are incentivized to film in the UK by the government’s Audio-Visual Expenditure Credit (AVEC), which offers a cash reimbursement of up to 25.5% of their expenditures within the country. To qualify, at least 10% of core production costs must be attributable to UK activities.
To facilitate compliance and transparency for the UK government, studios often establish distinct production companies in the UK for each film. These entities are mandated to file publicly accessible financial statements, offering an unprecedented look into detailed costs, including headcount, salaries, total expenditures, and the extent of cash reimbursements.
These production companies frequently operate under code names to avoid public attention during location filming permits. Disney’s subsidiary, Sand Castle Pictures, was the entity responsible for ‘The Little Mermaid,’ and its financial statements provided insight into both the UK government windfall and the actual $355.1 million cost incurred.
This final production cost notably exceeded initial projections, such as Deadline’s claim of a “$250m production cost.” The primary driver behind this budget escalation was the impact of the COVID-19 pandemic, as explicitly stated in the filings.
Filming, initially slated to commence between late March and early April 2020 in the UK, experienced repeated delays due to the pandemic. Production eventually began in January 2021 at Pinewood Studios near London but faced a temporary halt six months later when multiple crew members contracted COVID-19.
One significant measure employed by Disney to mitigate these cost overruns was the aforementioned cash reimbursement, which totaled $65.2 million (£49.7 million). This rebate reduced the movie’s net costs to $289.9 million.
When this net cost is offset against Disney’s estimated $285 million share of theater takings, the calculated box office result indicates a $4.9 million loss. This calculation, as specified, relies “purely using data from Disney,” encompassing the $355.1 million production costs and $65.2 million reimbursement from its filings, and the $570 million box office total from Disney’s press releases.
However, a comprehensive assessment of a film’s overall profitability extends beyond theatrical performance and production costs. A Disney spokesman clarified that the financial statements do not reflect whether the film was “overall profitable,” as “There will be other income generated by the production (such as DVD/Blu Ray sales, merchandising, etc.).
Conversely, the financial statements also omit marketing costs, which would need to be deducted from any additional revenue streams for a true profit/loss assessment. Disney does not disclose per-movie marketing spend or specific revenue from home entertainment and merchandise, making a complete, reliable financial estimation challenging.
Despite a lukewarm critical response, ‘The Little Mermaid’ has demonstrated substantial popularity on Disney’s streaming platform, Disney+. The film amassed 16 million views in its initial five days alone, signaling a strong performance in the digital domain.
Yet, precisely attributing subscription revenue from Disney+ to specific titles remains unfeasible, as Disney only reports aggregated figures for its Direct To Consumer (DTC) business, which includes Hulu and ESPN+ alongside Disney+. Subscribers pay for access to an entire content library, not individual films.
Recent insights, however, were provided by a Wall Street Journal report detailing a data leak. Internal spreadsheets suggested that Disney+ generated over $2.4 billion in revenue in the quarter ending March 30, 2024, accounting for approximately 43% of its DTC division’s revenue.
Beyond production costs and box office, ‘The Little Mermaid’ also benefited from other operational income. Filings indicate an additional $12.9 million (£9.8 million), including a $4.2 million (£3.2 million) grant from the UK government in 2021, which was intended to assist with pandemic-related challenges.
This additional income effectively pushed the picture into a positive financial standing, though not through direct theatrical performance or significant cost reduction. Disney CEO Bob Iger acknowledged the escalating costs within the industry, stating last year that the studio needs to “reduce costs on everything that we make because, while we’re extremely proud of what’s on the screen, it’s gotten to a point where it’s extraordinarily expensive.
Comparisons to other Disney live-action remakes highlight the varying financial outcomes. ‘The Lion King’ notably carried a $260 million budget, ‘Aladdin’ $183 million, and ‘Beauty and the Beast’ $254 million, with ‘The Little Mermaid’s’ initial $250 million estimate aligning with these high production figures.
Estimates from Deadline suggested ‘The Little Mermaid’ required a global box office gross of $560 million to break even, factoring in potential home release sales and TV/streaming deals. With a reported $567.51 million global box office haul ($297.19 million domestic and $270.32 million international), the film is projected to turn an “extremely thin profit depending on its home release sales.
This outcome contrasts sharply with the substantial profits generated by previous remakes: ‘The Lion King’ yielded $580 million in profit, ‘Aladdin’ $356 million, and ‘Beauty and the Beast’ $414.7 million. A film finance insider summarized ‘The Little Mermaid’s’ performance as “Not a huge disappointment, but a disappointment, nonetheless.”
The film’s financial trajectory reflects a broader industry trend where several major 2023 franchise movies, including ‘Fast X,’ ‘The Flash,’ ‘Ant-Man 3,’ and ‘Indiana Jones 5,’ released with budgets exceeding $200 million, have struggled to achieve significant profitability. This trend suggests that Hollywood studios, including Disney, are likely to exercise greater caution with high-budget productions moving forward.
While Disney is not expected to abandon its live-action remake strategy, future projects may be developed with tighter budgets. Upcoming remakes include ‘Snow White,’ ‘Lilo & Stitch,’ and ‘Mufasa: The Lion King,’ alongside others in development such as ‘Moana,’ ‘Hercules,’ and ‘The Hunchback of Notre Dame.’
Further analysis, particularly from Caroline Reid at Forbes, based on UK filings, indicated that ‘The Little Mermaid’s’ production budget “swelled to nearly $300 million by the end of August last year.” This figure, when converted from £243.5 million to approximately $297 million, re-evaluates the break-even point and potential losses.
This new budget estimate suggests the film’s losses could be significantly higher than previously thought. Using the $250 million budget, a break-even point of $625 million was estimated, leading to losses just under $60 million given the actual gross of $569.1 million worldwide.
However, with a revised $297 million production budget, the break-even point shifts to $742.5 million, consequently increasing estimated losses to $127.8 million. Moreover, applying a more conservative industry rule, such as the 3x production budget for profitability suggested by actor and producer Simon Pegg for ‘Star Trek’ films, would necessitate ‘The Little Mermaid’ grossing at least $891 million to break even, resulting in an approximate $180 million loss.
Such figures have led to strong reactions within industry commentary, with YouTuber Mr. H Reviews stating, “This bombed. This absolutely bombed. … A staggering waste of money. Absolutely unreal. Absolutely obscene.” He further characterized the financial outcome as “Not good. Absolutely abysmal. Woeful, in fact.”
‘The Little Mermaid’s’ opening weekend also presented a mixed picture, securing $118.6 million in its four-day domestic debut, a solid start to the summer box office season, and the fifth-highest Memorial Day weekend total. However, international results lagged, earning only $68.1 million from over 51 overseas markets.
This international underperformance, particularly in markets like China where it commenced with a mere $2.5 million, is attributed by some hopeful box office sources to “backlash…over the casting of star Halle Bailey as well as review-bombing.” This contributes to the unusual scenario where the film is projected to earn more domestically ($300M-$350M) than internationally ($260M).
Typically, tentpole films derive 60% or more of their global box office from overseas markets. ‘The Little Mermaid’s’ near 50/50 split between domestic and international takings is more commonly seen with smaller Disney titles like 2018’s ‘Christopher Robin’ or 2016’s ‘Pete’s Dragon.’
In a hypothetical break-even scenario based on a $560 million global box office, the film’s total global film revenues are estimated at $547 million against combined production and marketing expenses of $476 million, resulting in a net profit of $71 million before participations and residuals. This revenue breakdown includes $267 million in global theatrical film rentals, $100 million net from domestic pay/free TV and Disney+, $100 million from global home entertainment (DVD, digital), and $80 million from international TV and streaming.
Additionally, factors such as a significant percentage of child viewers (28% of the film’s audience), who typically pay discounted ticket prices, further influence the overall box office performance. This complexity underscores the multi-faceted nature of assessing profitability in modern film distribution.
The case of ‘The Little Mermaid’ serves as a crucial study in the evolving economics of large-scale film production and distribution. It highlights the challenges posed by escalating production costs, the unpredictable nature of global box office performance, and the nuanced contributions of streaming platforms and ancillary revenues.
As Disney continues to navigate this intricate landscape, the lessons learned from ‘The Little Mermaid’ will undoubtedly inform future strategic decisions regarding content creation, budget allocation, and the intricate balance required to deliver cinematic experiences that are both creatively compelling and financially viable.
