Disney hopes "Toy Story 3" swag reaps $2.4 bln

Tue Jun 1, 2010 7:52pm EDT

* Analysts wary of Disney's big retail target

* Disney plans short cartoons to support franchise

By Alex Dobuzinskis

LOS ANGELES, June 01 (Reuters) - Walt Disney Co (DIS.N) expects retailers to sell $2.4 billion in "Toy Story 3" merchandise this fiscal year, potentially the company's biggest licensing windfall from a single film.

The third instalment of the toys-come-to-life fantasy, launched in 1995 with Tom Hanks and Tim Allen playing Woody the cowboy and Buzz Lightyear, opens June 18. But Disney has plans for the franchise after its theatrical release.

Borrowing a page from its "Cars" franchise, executives said they planned to make as many as four short "Toy Story" cartoons per year for television and online, keeping the brand alive.

"Cars" has generated $2 billion a year in global merchandise sales since that movie came out in 2006.

Some analysts say that projection may be overly ambitious. The $2.4 billion Disney is expecting in total retail sales, of which the company gets a portion, would be heavily tilted to the next few months to the end of September, when the company's current fiscal year ends. The figure is roughly equivalent to the turnover Disney's consumer division generates every year.

"We're more than halfway through the year so we feel pretty comfortable with that number," said Andy Mooney, head of Disney's consumer products division. "It would most likely be our biggest event property ever."

Disney does not disclose how much revenue it receives from licensing, but analysts said the company could receive more than $200 million from its "Toy Story" merchandise line, based on the company's projections.

"They've been waiting for this one, anticipating huge sales," said Jim Silver, editor-in-chief of Time To Play Magazine, which examines the toy industry.

Disney's projections for "Toy Story 3" merchandising are based on initial sales, predictions from licensing partners and the historical performance of other franchises.

In Disney's partnership with Toys "R" Us, the retailer is creating special boutiques within its nearly 1,300 stores that will be dedicated to the movie's products.

The first "Toy Story" movie came out in 1995 and the sequel "Toy Story 2" in 1999. Both movies and this latest instalment are from Pixar Animation Studios, which Disney bought in 2006.

Combined merchandising -- from toys and apparel to stationery and books -- has so far generated more than $9 billion in global retail sales, Disney said.

Doug Creutz, analyst with Cowen and Company, does not expect an automatic hit for "Toy Story" merchandising, but that it should perform strongly.

"A lot of it is going to have to do with how the movie does. If the movie is a big hit then they won't have much of a problem," he said.

Disney's consumer products division generated $2.4 billion in revenue last fiscal year, or about 6.7 percent of the company's overall revenue of $36.1 billion.

An episodic cartoon series tied to "Toy Story", called "Buzz Lightyear Star Command", aired in recent years. But that was focused on just one character, and Mooney said that it contributed little to the merchandising line.

"What we've learned is, the strength of the property rests on the relationship between the core characters, and that was missing from the original Buzz Lightyear series," he said.

Mooney said the planned "Toy Story" cartoons of under seven minutes will be more thematically aligned with the films. (Reporting by Alex Dobuzinskis; Editing by David Gregorio)