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"Toy Story 3" Will Be a Big Play for Disney


Even if you don't have kids it's clear that the world wants more Woody and Buzz, and less Shrek.

Hello from New York where I can tell you with as much modesty as I can possibly fake that I know children. I can tell you that kids not only enjoy watching the same DVDs repeatedly, they actually prefer it. I can tell you that "Nature vs. Nurture" debates are for sociology majors who don't have kids. Your kids are who they are; a parent's job is simply to try not to screw the kid up too much. I can explain to you that even strong 4-year-old boys have lousy aim with handguns. Even light guns, like .22s. That's why I gave him and his sister Tasers.

I can also tell you that little kids don't particularly enjoy movies about a middle-age ogre whose one dream in life is that his wife and children didn't exist. Children don't really understand the It's a Wonderful Life riff. For that matter, the Jimmy Stewart Christmas classic is a movie about suicide. I don't want my kids to think I dream of a life without them. For one thing, I don't have that particular dream. For another, any kid who does understand why daddy wished his whole family didn't exist is going to be spending at least $250,000 in therapy over the course of their life.

All of which we discussed in this space a couple weeks ago and Goldman Sachs (GS) is getting around to discussing today with a downgrade of DreamWorks (DWA). Goldman is suggesting that Dreamworks just might have gone too far in trying to milk profits from the Shrek franchise. Which is what I meant when I called the movie "Shrek: We're Beating the Franchise to Death."

But I'm not here to brag, unless talking favorably about stocks you own is bragging, in which case I am. In the same note in which Goldman takes an ax to DreamWorks it talks up Disney (DIS). Goldman notes that the upcoming Toy Story 3 from Disney's Pixar has "much more pent-up demand." Which you might need a kid to fully appreciate but you can take this dad's and Goldman Sachs' word for it. My daughter announces the days until Toy Story 3 comes out literally every morning. I could skip Christmas and her birthday and she would forgive me faster than if I blow off Toy Story 3.

The point, stock shoppers, is that you didn't need Goldman Sachs, a link to, access to kids, or even me to give you the heads up that Toy Story 3 was, and is, going to take the steel-toed boots to Shrek at the box office. You also could have:

  • Made a trip to Target (TGT). There's simply a jaw-dropping amount of Toy Story 3-related merchandise on the shelves of the toy section. What's more, the boxes were borderline sloppy at an otherwise immaculate store. The amount of merchandise tells you the Target buyers strongly believed Toy Story was going to be huge. Movie tie-in or not, retail buyers won't buy goods they don't think they can sell. Couple the amount of merchandise with the relative disorder and your can infer that Toy Story merchandise is getting a lot of "play" from customers. Bad for the kids keeping the shelves neat. Good for Disney shareholders.

  • Watched the respective previews of the movies at their websites. Here's Shrek's. I couldn't really hear the dialogue because the background music was too loud but I know Shrek seems to get sucked into a bottomless void and there are a lot of witches.

  • Toy Story's site has witty jokes, lays out a traditional adventure story, and didn't cause me to rue the two hours of my life I was going to lose taking my kids to see this dreck.

I'm not badmouthing Goldman Sachs' downgrade of DreamWorks. As it agrees with many things I've been saying, I find the report to be unusually insightful and wise. What I am saying is that, perhaps more than any other industries, you can do your own research on media and studios. Going to Target isn't going to help you make many investment decisions based on Hot Tub Time Machine but there's no beating doing your own footwork as a starting point for determining the likely success, or failure, of a motion picture.

From Toy Story's website to its retail penetration, everything about Disney's summer film screams a hard push by the studio and a likely hit. Shrek's website and promotional tie-in (including a poisonous glass!) told you DreamWorks was mailing it in. I was looking into the stock after it got hit by a weak release for How to Train Your Dragon. I was wrong. That's the cool thing about stocks, the research never stops and you can change your mind at any time, as long as you know what you're looking for.

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