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December 17, 2007

A Legendary Weekend At The Box Office

Proving once again that people will buy tickets when there is appealing in the theatres, the weekend box office rose 38% for the top twelve films according to BoxOfficeMojo.com. It's easy to point to home theatres or digital distribution but this past weekend and last summer showed that demand for the movie theatre experience remains robust if the studios release good product.

That was certainly the case this weekend when the top two films massively exceeded expectations. I Am Legend set December box office records with $76.5 million vs. estimates of $40 million. This marks the seventh straight #1 opening for Will Smith who by any measure is now the most bankable star in Hollywood. The #2 film was Alvin and the Chipmunks. The film grossed $45 million, fully three times most estimates.

Entering the weekend the quarterly box office was running down 9.5% but assuming the gain holds through the weekday play dates, the gap should fall to 6% or less. The gap should close further through year end as the almost certain blockbuster National Treasure 2 opens on Friday. That would mean that there are three films pulling in ticket buyers where just one film was popular a year ago.

Year to date the box office is up over 5% despite the poor fall and early winter. This follows a gain of over 4% in 2006, helping to isolate 2005's 6.1% fall in receipts as the exception. Prior to 2005, the box office was up every year since 1992. The same can't be said for ticket sales (those are flat over the past two years) but studio and theatre costs are measured in absolute revenue not number of tickets sold. I stand by my belief that the 2005 drop was a fluke and continues to color the movie business much more negatively than it deserves.

If the rest of the year performs as strongly as I expect, on Wall Street the theatre companies should be the prime beneficiaries. Regal Entertainment, Cinemark, and Carmike are all trading at or very close to 52 week lows. Regal and Cinemark have excellent current yields that provide support. I think the stocks can rally a buck or two from here before year end.

Posted by Steve Birenberg at December 17, 2007 08:20 AM in Box Office