Disney Spent $34.7 Million On Canceled Pixar Spinoff

It’s hardly a secret that Disney spares no expense on making its movies. The studio typically spends north of $250 million on instalments of its most famous franchises. The exceptions are its computer-animated pictures which cost considerably less but still don’t come cheap.

The cost of making computer-animated movies is usually a closely guarded secret. That’s because studios tend to absorb the costs of individual pictures in their overall expenses and don’t itemize how much was spent on each one. There are no requirements for studios to report the cost of each of their productions in North America which is where the majority of Disney’s computer-animated movies are made.

For example, Walt Disney Animation Studios in Burbank, California teamed up with its studio in Vancouver to make Moana 2, which recently sailed past $1 billion at the box office. Likewise, last year’s highest-grossing movie, Inside Out 2, was produced by Disney’s Pixar division in Emeryville, California.

The locations kept the cost of these productions confidential but a few others have slipped through the net. One is a spinoff of Pixar’s hugely successful Cars franchise about talking cars which have mouths instead of front ventilation grills and eyes in their windshields.

The first movie in the series was released in 2006 and featured the voices of A-Listers Owen Wilson, Bonnie Hunt and Paul Newman. Wilson played Lightning McQueen, an arrogant car who competes in an animated event inspired by NASCAR but gets lost in a backwater where he finds the true meaning of friendship with locals who have never heard of him before.

Its simple premise and colorful characters made the movie a hit with children whilst its connection to NASCAR, along with voice work from actual drivers, appealed to their parents. It led to the movie grossing $462 million according to Box Office Mojo but that was just the start. Its greatest success came from the sale of toy cars of its characters. By 2011 merchandise revenue from the movie had reportedly accelerated past the $10 billion mark so a sequel was inevitable.

It was released in 2011 and took McQueen and his pals on an international adventure. Audiences lapped it up and the movie made $559.9 million at the box office fueling the development of a follow-up as well as a series of shorts and a computer-animated spinoff film called Planes. Billed as ‘The World Above Cars‘, its protagonists were planes with mouths below their propellers and eyes in their cockpits. It had a similarly schmaltzy plot to Cars about a crop duster with a fear of heights who manages to compete in an air racing championship with help from a World War II fighter plane.

It was produced by DisneyToon Studios, a California-based division of Walt Disney Animation Studios which largely focused on making direct-to-video feature films. Planes was an exception as it benefited from strong tailwinds due to the success of Cars 2. This led to Disney deciding to release it theatrically in 2013 making it the first DisneyToon Studios film to be released in theaters in North America since Pooh’s Heffalump Movie eight and a half years earlier.

Despite originally being destined for a home release, Planes had a high-level voice cast featuring Priyanka Chopra, Teri Hatcher, Stacy Keach, John Cleese and Val Kilmer. Despite a lukewarm reception, with a critics score of just 26% on review aggregator Rotten Tomatoes, Planes grossed a respectable $240.2 million putting it on course to get a sequel of its own.

Called Planes: Fire & Rescue, it told the story of a famous racing airplane who meets real heroes when he becomes a firefighter after damaging an engine in an event. This too was a DisneyToon Studios production and was also released in theaters where it grossed $147 million. Although this was less than its predecessor its review scores were an improvement with critics giving it 44% on Rotten Tomatoes.

It was enough for a third movie in the series to get the green light and in 2017 Disney revealed a clip of it at its biennial D23 convention. With the working title of Space, it was set to center on two planes flying “to the edge of the atmosphere”. The movie was scheduled for release on April 12, 2019 but was abruptly removed from the release schedule in March 2018. The reason for this soon became clear.

Three months after it dropped off the schedule DisneyToon Studios was shut down and development on the movie ground to a halt. The rise in popularity of streaming combined with a drop in DVD sales led to a decline in the need for the direct-to-video pictures which DisneyToon Studios specialized in. Canceling Planes 3 came at quite a cost.

Pre-production work on the movie began in 2017 and was handled by Disney subsidiary Grand Central Productions in the United Kingdom. Making the movie in the U.K. enabled Disney to take advantage of the government’s generous fiscal incentives which offer studios a reimbursement of up to 25.5% of their costs provided that they spend at least 10% of the total in the U.K. To demonstrate this to the government, studios set up subsidiaries in the U.K. which own the rights to the production and file financial statements. Studios have devised an innovative funding model which ensures they receive the reimbursement in cash.

The fiscal incentive comes in the form of a tax credit so if the U.K. company makes a profit, it gets a reduction to its tax bill. However, if it makes a loss, it has no tax to pay so it receives a cash reimbursement instead.

In order to engineer this, the studio only gives it approximately 74.5% of the projected production cost in cash with the remaining 25.5% coming in the form of a loan. The loan is secured on the rights to the film meaning that if the money is not repaid, the studio can take them back. Creating a security is a necessary part of structuring loans but it is essentially a technicality as the studio owns the U.K. subsidiary which owns the rights to the film so it makes no difference if it takes them back. Likewise, the studio provide all of the funding for the U.K. subsidiary so it is in control of whether it repays the loan.

The loan and cash from the studio gives the U.K. company 100% of the production budget for the film and it sets the scene for the cash reimbursement. Loans are not counted as revenue because they need to be repaid so the U.K. company therefore makes a loss equivalent to around 25.5% of the film’s budget. That is when the U.K. government steps in as it reimburses this loss.

As the amount of the reimbursement is equivalent to the loan that the company owes its parent, the cash can be passed to the studio as repayment. Thanks to these twists and turns, the U.K. government covers 25.5% of a film’s costs thereby reducing the studio’s net spending on it.

The production companies have code names to keep the name of the production a secret when it advertises for casting calls. The company behind Planes 3 is named Grand Central Productions in a nod to the historic Grand Central Air Terminal in Glendale which was famous for stunt flying in the 1920s. It is now a campus owned by Disney and is where DisneyToon Studios was based.

Financial statements for Grand Central Productions show that by July 28, 2018, just after Planes 3 was grounded, a total of $34.7 million (£26.2 million) had been spent on the movie. In line with the funding model, the financial statements confirm that Disney has security “over the company’s rights, title and interest in the copyright and all other rights of any kind in the material underlying the film ‘Planes 3‘.”

The filings also note that “during the period, the company took the decision to cease production of the motion picture. The related costs of termination have been included and incurred within the current period.” They add that the “final cost of the film was in line with its budgeted cost.”

Grand Central Productions banked a $6.5 million (£4.9 million) reimbursement bringing the net spending on Planes 3 down to $28.2 million (£21.3 million) which is still sky high, especially given that the movie was never released.

To put it into context, this is more than the £19.1 million ($36.8 million at the time) cost of making 2005’s Wallace & Gromit: The Curse of the Were-Rabbit as this report revealed. It was money well spent as The Curse of the Were-Rabbit won Best Animated Feature Film at the 2006 Academy Awards and remained number one at the worldwide box office for three weeks in a row giving it a total gross of $192.7 million.

Canceling movies when they are well into production is far from uncommon. Over the past few years Warner Bros. has done this with Batgirl as well as the live action and animation hybrid, Coyote vs. Acme. The studio denied that it had done this to get a tax write-off having spent money on a production which would not be released whilst Disney did not respond to an opportunity to comment on the cancelation of Planes 3. It wasn’t the only casualty of the DisneyToon Studios closure.

In 2023, concept art for another Cars spinoff came to light. Called Metro, it was based on ‘The World Below Cars‘ and had the gritty setting of the subway system as it starred metro trains with eyes in their windows and mouths for front ventilation grills. Although this too got the red light, it could perhaps still see the light of day in some way, along with Planes 3.

In 2022, a nine-part streaming series called Cars on the Road debuted on the Disney+ platform and saw Lightning McQueen and his pals going on a cross-country trip across the U.S. Critics rated it 93% so a follow-up road trip for the Cars characters seems like a no-brainer. Time will tell if the stars from Planes and Metro join them on it.