Disney seeks 'Pirates' booty

NEW YORK (CNNMoney.com) -- Peter Parker set a new box office record two weeks ago and then that big green ogre followed up with the best opening for an animated movie ever this past weekend.

So can Jack Sparrow and the rest of his swashbuckling pals help lead "Pirates of the Caribbean: At World's End," to a huge debut this Memorial Day weekend?

Johnny Depp's Jack Sparrow has been a treasure for Disney. Last year's "Pirates" movie grossed more than $1 billion worldwide and hopes are high for the upcoming third film.

One thing is certain. Walt Disney (Charts, Fortune 500) has a lot riding on the third, and supposedly final, movie in the "Pirates" franchise. Disney's studio business accounted for nearly a quarter of the company's total sales and operating profits in the first six months of this fiscal year.

The original "Pirates" film, released in 2003, was a surprise hit. Few thought that a film based on a Disney theme park ride would become a box office smash.

But "Pirates of the Caribbean: The Curse of the Black Pearl," thanks to an oddly mesmerizing performance by Johnny Depp as Jack Sparrow, went on to gross $303.4 million in the U.S. and another $348.5 million internationally according to figures from movie industry tracking firm Box Office Mojo.

Last year's sequel, "Pirates of the Caribbean: Dead Man's Chest," was an even bigger hit. "Dead Man's Chest" was a billion-dollar movie worldwide, selling $423.3 million's worth of tickets domestically and another $642.3 million internationally.

The film also set an opening weekend record of $135.6 million in the U.S., a figure since surpassed by "Spider-Man 3's" $151.1 million take this year.

So how will "At World's End" do? Even though critical reviews for the second film were lukewarm, audiences obviously ate the film up. So analysts who follow Disney and the movie industry expect the movie to be a huge hit.

"Johnny Depp has nothing to worry about. 'Pirates' is going to dominate Memorial Day weekend," said Gitesh Pandya, editor of BoxOfficeGuru.com, a Web site that tracks the film business. "The bottom line is that Disney will be rolling in the cash this weekend."

But will "Pirates" break "Spider-Man 3's" new record and give Disney back the bragging rights it lost to Spidey studio Sony (Charts)? Analysts aren't sure since the movie will face extremely tough competition this weekend from DreamWorks Animation's (Charts) "Shrek the Third", which grossed $122 million in its opening weekend, as well as "Spider-Man 3."

Still, the movie has a decent chance of breaking the record, says David Joyce, an analyst with investment bank Miller Tabak & Co. He argues that the strong box office for "Spider-Man" and "Shrek" should help "Pirates" because it proves that people are going to make it a habit to hit the theaters early and often this summer.

Plus, audiences typically flock to the latest film hitting the multiplex. So some concerns about competition may be overblown.

"It's not as if all these movies are all coming out on the same weekend. So you have people going out three weekends in a row," said Joyce. "With so many franchise films and sequels this year, it makes it easier to get people into theaters on a recurring basis."

Nonetheless, analysts said that whether "Pirates" breaks the record is not truly important as long as the movie has long sea legs and garners a lot of repeat business. That doesn't appear to be the case for "Spider-Man 3," which opened strong but has seen its box office sales tumble sharply in the past two weeks.

Alan Gould, an analyst with Wall Street brokerage Natexis Bleichroeder, said he thinks that even if "Pirates" doesn't set a new record this weekend, it's likely to be the biggest smash of the summer.

Gould predicts that "Pirates" will gross more than $400 million in the U.S. while "Spider-Man 3" and "Shrek the Third" will each generate about $340 million in U.S. box office receipts. And Pandya agrees with Gould.

"If 'Pirates' does not beat 'Spider-Man 3's' record, there's nothing wrong with that because in the long-term 'Pirates' is going to out-gross 'Spider-Man 3,'" Pandya said.

Pandya also points out that a strong opening for "Pirates" will also be a plus for Disney since a trailer for "Ratatouille," the latest animated movie produced by Pixar, which is now a fully owned subsidiary of Disney, is likely to run before "At World's End". "Ratatouille" hits theaters on June 29.

Last year's "Pirates" film came out on July 7, a month after Pixar's "Cars." So "Cars," which still generated a healthy $244 million at the box office, did not have the benefit of latching on to "Pirates" buzz.

"The 'Ratatouille' trailer will be in front of 'Pirates' and will be seen by millions of people this weekend, people that probably have already seen 'Shrek' and will look at 'Ratatouille' as the next big cartoon. There is no better place to have your trailer than before 'Pirates,'" Pandya said.

And both Gould and Joyce said that the box office figures, while important, pale in comparison to the revenue and profit that "Pirates" and "Ratatouille" are likely to generate from DVD sales.

In fact, Disney's studio typically gets a bigger profit boost from the DVD sales since marketing and distribution costs for the films have to be recognized when they hit theaters.

"The big driver for the studio's profits is when they recognize video revenue. The biggest quarter for Disney tends to be when the DVDs come out and in this year's December quarter, both movies will probably be out for the holidays," Gould said.

So as long as both films have a lengthy and prosperous run in theaters this summer, Disney shareholders will have many reasons to cheer -- even if they don't break opening weekend box office records. That's because the DVDs are likely to be stocking stuffers this winter.

Analysts quoted in this story do not own shares of the companies mentioned and their firms have no investment banking relationships with them.