There may be trouble brewing in toon town.

“Hercules” is on track to become Disney’s least-successful animated feature in eight years. In fact, since the highwater mark of 1994’s “The Lion King,” which grossed a mighty $312 million Stateside, the Mouse House’s animated pics have seen a steady decrease in U.S. ticket sales.

Meanwhile, three rival studios — 20th Century Fox, DreamWorks and Warner Bros. — have poured big bucks into their feature animation shops and are set to bring their first products to market over the next year.

In the next 18 months, no less than five new big-budget feature cartoons, plus Disney’s reissue of its 1989 hit “The Little Mermaid,” will be released. As those pictures begin competing for promotional partners, toy licensees and audiences, one analyst predicts, “It’s going to be a bloodbath.”

“Hercules” could end up topping $100 million at the domestic box office — a hit by virtually any standard — but Disney and exhibitors had high hopes the picture would reverse the recent downward trend. (For current B.O. figures, see page 63.)

“We really thought they had turned the corner and that this would be more along the lines of ‘Pocahontas’ or ‘The Lion King,’ ” said one major theater chain honcho. “I think this was a disappointment for us and for Disney.”

Disney execs say they are not disappointed in “Hercules” and that it’s unfair to compare every one of their animated features to “Lion King,” which is the fifth-highest-grossing film of all time.

“You don’t compare every Paramount film to ‘Forrest Gump,’ ” said Dick Cook, Disney president of worldwide marketing and distribution.

Industry speculation about what’s causing the decline varies wildly. While some observers believe the franchise may have worn out its welcome with audiences, others cite competition from live-action fare, demographic shifts or parental backlash against the Disney merchandising machine.

Probably the biggest difference between “Hercules” and its illustrious predecessors, however, is the new film’s lack of appeal for adults and teens. Whereas “Beauty and the Beast,” “The Lion King” and “Aladdin” worked as date movies as well as family outings, “Hercules” seems to attract mainly young kids and their obliging parents.

While interest in the franchise may have waned, the cost of producing animation has skyrocketed. Competition for animation artists and computer gurus reportedly has pushed some budgets past $100 million. Disney declined figures for “Hercules” production costs, but sources pegged them at upwards of $85 million.

Marketing costs have increased, too: Sources estimate Disney spent upwards of $35 million on its marketing campaign for “Herc,” which included a Saturday-night parade through New York City.

Certainly no one is predicting the demise of feature animation anytime soon. If “Hercules” hits the $100 million mark, it will become only the eighth animated pic in history to do so.

Only one of those, “Snow White and the Seven Dwarfs,” was released before 1991. Disney remains the undisputed king of the cartoon hill, having released every one of the $100 million-plus grossers.

Among the new field of contenders, Fox will be the first out of the gate when it releases “Anastasia” Nov. 22. The film will have stiff competition from the Magic Kingdom: Disney is re-releasing “The Little Mermaid” one week earlier and the live-action “Flubber,” starring Robin Williams, the week after.

Fox will not go down without a fight. The studio has promised one of its most expensive marketing campaigns ever for the animated musical based on the Russian historical figure.

“What’s clearly happened with previous non-Disney animated pictures and maybe even some of the recent Disney pictures is they have not had broad appeal,” said Bill Mechanic, chairman-CEO of Fox Filmed Entertainment. “What we’ve tried to do is make a movie first and an animated movie second. We’ve been very careful to make sure it’s not a kiddie picture.”

Next Memorial Day, WB’s “The Quest for Camelot” charges into theaters. Based on a novel by Vera Chapman, the film focuses on the early days of the Arthurian era. “It’s more rustic than knights in shining armor,” said Max Howard, president of feature animation at Warner Bros.

End of a cycle?

Howard acknowledged the declining Disney numbers have given him pause. “Animation has been cyclical; it had its early heyday and then Walt Disney died and there was very little material for 20 or 30 years. The recent era began with ‘The Little Mermaid.’ One wonders if this is a cycle that’s coming to an end.”

Howard doesn’t think so, though. He said he believes animation is a technique like any other. “I just see it as a medium that is marvelous for telling stories. You don’t decide not to use a particular camera just because another film that used it didn’t work.”

Later in the summer of 1998, Disney will unveil its 36th full-length animated feature, “Mulan,” which features the voice of Eddie Murphy.

DreamWorks will unveil its biblical tale “The Prince of Egypt” in the fall of 1998 and BV will release Pixar’s computer-animated follow-up to “Toy Story” — “A Bug’s Life.”

Domestic box office is only the tip of the iceberg when it comes to animation revenue. Ancillaries, including merchandising, video and the growing international market, together account for an additional five to 10 times as much money.

While all revenue streams are generally driven by U.S. ticket sales, there are always exceptions. “The Hunchback of Notre Dame,” which was considered by some a domestic disappointment at $100.1 million, grossed an additional $184 million overseas. Indeed the international appetite for animation appears to be growing.

Disney execs are quick to point out that the studio’s animated features are not sequels, and therefore should stand or fall on their own merits.

Each one a different story

“To try and lump them together doesn’t make sense,” Cook said. “We release five or six Walt Disney movies a year. Each one of those films performs differently depending on that particular product at that particular moment.”

However, Disney has long been recognized as the only studio to inspire brand name loyalty in consumers. The studio’s ability to turn its logo into a Good Housekeeping Seal of Approval has been one of its crowning achievements.

But a brand is only as good as its product, warns an exec at a rival studio. “If they continue down this path, the brand will become less appealing.”

One theory has it that as the baby boomers’ offspring get older, the core audience for animated features is shrinking. Indeed, the number of U.S. children under five has decreased over the last few years, but not at the rate that the box office has dropped off. The population of under-fivers grew to its highest level in 1994, when there were an estimated 19,696,000. The number dropped 2.4% to 19,229,000 this year and is expected to bottom out at 18,960,000 in the year 2002 before growing again.

Clearly “Hercules” got a run for its money from live-action films aimed at broad audiences, including “Batman and Robin,” which opened a week before and “Men in Black” which bowed the following week.

Some believe the emphasis on merchandising, which is even the subject of several jokes in “Hercules,” is beginning to grate on parents. “The consumer is catching on that these things are a vehicle for merchandising,” one exec at a rival studio said.

Merchandising has been a cash cow for Disney. Eight years after its release, “The Little Mermaid” toys remain a hot commodity for little girls. But after some retailers got burned by slow-selling “Hunchback” gewgaws, they reportedly were more conservative in their commitment to “Hercules” stuff.

DreamWorks’ “The Prince of Egypt” will be a true test of whether an animated feature with a serious subject matter can stand on its own.

The film, about Moses, will have no fast-food tie-ins and very little merchandising. “Our business should not be driven by merchandising pot
ential,” said Brad Globe, head of consumer products for DreamWorks. “The most important thing is quality. If it’s compelling entertainment, the rest takes care of itself.”