« Routinely Good Quarter for Disney | Main | Buying More Endeavor/American Apparel »

November 12, 2007

Box Office Struggles Again

The winning streak at the weekend box office didn’t last long. After last weekend saw a string of six straight down weekends snapped, this weekend was back in negative territory. A disappointing opening for Fred Claus from Time Warner's Warner Brothers studios was the primary culprit in an 11% year-over-year decline for the top 12 movies. Most observers had pegged Fred Claus in the $28-30 million range while the current estimate for the weekend is $19 million. This lagging performance offset good holds for last weeks top two films, American Gangster and Bee Movie. Dan In Real Life also had a good hold, dropping just 25%; however, this film is heading toward a $40-45 million gross, great relative to expectations but not big enough to drive overall box office results.

Bee Movie fell 32% and took the top ranking with $26 million. American Gangster dropped 44% and came in second with $34 million. Investors may look favorably on Dreamworks Animation (DWA) since the film was not expected to win the top spot this weekend. Certainly, the performance is good news for DWA but the second weekend 32% decline is actually slightly larger than Over The Hedge, Tarzan, and Chicken Little, three films with similar opening weekend grosses. In addition, these three films ended with a total domestic gross ranging from $135 million to $171 million. Barring unusually good legs, Bee Movie will be lucky to reach the top end of this range. Most analysts had built in a domestic gross of up to $200 million in their models. A $20-30 million shortfall may not seem like much but when you multiply through lower grosses in the international, home video, and TV rights windows it could lead to a meaningful shortfall for DWA relative to estimates in 2008. Unit volumes of the Shrek 3 this quarter are more important to DWA's financial results and share price performance but the fact that Bee Movie looks like it will the end of expectations at best leaves little margin for error for DWA.

There are only a few other items of note in this weekend's box office....

.... First, the performance of Disney films The Game Plan and Dan In Real Life remains better than expected. Second, American Gangster is getting some Best Picture Oscar hype. It may get the nomination but the film it is often compared to, The Departed, fell just 29% its second weekend. And yes, box office does impact the Oscar race. Finally, speaking of Oscars, the latest Coen brothers film, No Country For Old Men had a huge opening on a very limited number of screens. The big number along with stellar reviews, 95% at Rotten Tomatoes, puts it high up in the race the coveted Best Picture nomination.

Despite the lagging box office this quarter, now running down about 9%, I am sticking with my long in Regal Entertainment. I am counting on the 5.8% current yield to support the shares and drive relative performance in a shaky market environment.

Posted by Steve Birenberg at November 12, 2007 09:36 AM in Box Office