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Disney's 'Little Mermaid' a test for company's film strategy amid recent struggles

Disney's (DIS) live-action "The Little Mermaid" secured $118.6 million in its 4-day opening weekend debut, according to the latest studio estimates. That's just shy of the $120 million forecast, but still a solid start to the summer box office season and the fifth-highest total for any Memorial Day weekend ever.

International results lagged with the film earning just $68.1 million from more than 51 markets overseas.

The film's early domestic success represents a cautious win for Disney, which has struggled to secure serious gains at the box office outside of the Marvel Cinematic Universe. "Little Mermaid" will have to continue to perform well in the coming weeks in order to hit its break-even point of $250 million.

Last summer, Pixar's "Toy Story" prequel "Lightyear" fell short of expectations, securing just $51 million in its domestic debut before going on to gross a mere $118 million in theaters ahead of an expedited Disney+ release.

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More recently, the animated film "Strange World," starring Jake Gyllenhaal and Dennis Quad cost the company a reported $200 million after it opened to dismal reviews during Thanksgiving week, marking one of the worst flops of 2022.

Industry watchers blamed the misses on poor marketing plans and audience confusion over which titles were theatrical exclusives and which were streaming-only releases on the company's Disney+ platform.

Others have suggested an overall animation slowdown, although the strong performances of competitor titles debunks that theory with Universal's (CMCSA) "Minions: The Rise of Gru" and "The Super Mario Bros. Movie" crushing expectations.

'The Little Mermaid' (Courtesy: Disney)
'The Little Mermaid' (Courtesy: Disney)

Disney CEO Bob Iger referenced "The Super Mario Bros." during the company's latest earnings call, suggesting more upside to its own theatrical business.

"Allow me to digress for a moment to congratulate Universal for the tremendous success of ‘Super Mario Bros.'" Iger said on the call. "It certainly proves people love to be entertained in theaters around the world, and it gives us reason to be optimistic about the movie business."

Still, Disney has said it will be more strategic when it comes to the content it produces — particularly the content that lives on Disney+, which saw streaming losses narrow in the latest quarter despite a miss on subscriber net additions.

"We are in the process of reviewing the content on our DTC services to align with the strategic changes in our approach to content curation," CFO Christine McCarthy said on the call, adding, "Going forward, we intend to produce lower volumes of content in alignment with this strategic shift."

Iger added the company will be "much more surgical about what we make" and that high-performing theatrical tentpoles like "The Little Mermaid" could serve as a catalyst for future subscriber growth.

"This is part of the maturation process," the executive said. "As we grow into a business that we had never been in, we're learning a lot more about it. Specifically, we're learning a lot more about how our content behaves on the service and what it is consumers want."

Disney has reiterated plans to slash $5.5 billion in costs, which will include $3 billion in content costs. The company confirmed it will take a content impairment charge between $1.5 billion and $1.8 billion following the removal of multiple series and specials from both Disney+ and Hulu.

Several titles, including Disney+’s "Willow," "Big Shot" and "The Mighty Ducks: Game Changers," along with Hulu’s "Dollface" and "Y: The Last Man," were reportedly removed from their respective services on May 26.

The move comes amid larger cost cuts and restructuring plans after the media giant previously announced the effort to slash 7,000 jobs in February. The company went through its first round of layoffs at the end of March. Its second and largest round occurred in late April with a third round occurring last week.

Disney's stock is down about 20% compared to this point last year.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com

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