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May 18, 2007

Shrek The Third Hits Theatres

The second big movie of the summer season, Shrek The Third, hits theatres today (actually showings began at 10 PM on Thursday night but those will count as opening day and opening weekend totals). No other new films are in wide release this weekend and Spiderman 3 is fading fast – even though it is still headed well over $300 million it will fall well short of the first two installments.

Expectations for Shrek 3 are for an opening around $110 million, well behind the new record set by Spiderman 3 of $151 million set just two weeks ago. My sense is that there is some worry that Shrek 3 may get squeezed between Spiderman 3 and Pirates 3 which opens next weekend and is apparently tracking extremely well.

All three Shrek movies opened on the same weekend. The original opened in 2001 and pulled in $42 million its first weekend on its way to $267 million domestically. On the second Memorial Day weekend, the three day gross matched the opening weekend. The film showed great legs, finishing with six times its opening weekend gross.

Shrek 2 opened on a Wednesday in 2004 and pulled in $21 million the first two days before picking up $108 million on its first weekend. The second Memorial Day weekend saw the gross fall to $72 million on its way to domestic box office of $441 million, good for second all-time if you disregard the gross form the 1997 re-release of Star Wars. Shrek 2 also showed good legs, especially as the era of frontloaded box office receipts was firmly in place by its 2004 release.

Shrek 3 should benefit from the broadening of the audience base as evidenced by the much larger gross of the second film compared to the first. However, early reviews have been mixed to poor which could hurt. The first two films were very well reviewed. Then again, Spiderman 3 met with mixed reviews before blowing away the opening weekend record and beating high expectations.

I think that Shrek 3 may surprise to the upside because expectations have been held in check by its placement between Spiderman 3 and Pirates 3.....

The comparison to a year ago is vs. The DaVinci Code and Over The Hedge which were new releases and brought in a combined $115 million. If Shrek 3 brings in around that much, the comparison should be a good one as Spiderman 3 should bring in another $25 million as much the next films combined a year ago. The box office enters this weekend 5.4% ahead of a year ago and up 6% quarter to date.

Shrek 3 is distributed by the Paramount division of Viacom (VIA) but is still a Dreamworks Animation (DWA) release. Pirates 3 is wholly owned and distributed by Disney (DIS).

Adjusted for the $2 special dividend paid in April, Regal Entertainment (RGC) shares closed at an all-time on Wednesday, up 17% since it went ex-dividend on March 26th. I remain long and think continuing strong box office comparison can push the stock up another 5% or so in the next month as which point I will likely take my sizable total return and go home.

Posted by Steve Birenberg at May 18, 2007 02:29 PM in Box Office