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January 17, 2006

Weekend Box Office Report: Good For Disney and Lions Gate

The holiday weekend box office did nothing to stop the skeptics worries about faltering ticket sales as total receipts were down 16% from the same weekend a year ago, although vs. 2004 the receipts were up 6%. Despite the lackluster overall results, the news was good for Disney (DIS) and Lions Gate Entertainment (LGF)....

The monster hit The Chronicles of Narnia: The Lion, The Witch, and The Wardrobe continued to pull in big bucks for DIS. The film fell a moderate 35% from last weekend (on a 3 day basis) and brought in $12.2 million pushing its domestic gross to $263 million. The film looks like it could head toward $300 million in its U.S. run, matching or slightly exceeding the haul of the latest Harry Potter film. Overseas revenue continues strong as well and the film has now brought in over $320 million in international markets. While DIS is sharing the financial success of Narnia with a company controlled by Philip Anschultz, the film is important in that it has established an potential seven film series which DIS can put through its many windows including home video, theme parks, and merchandising. DIS shares have acted well this year on the success of Narnia and indication that December quarter theme park trends were solid. I still think DIS shares have further upside as most of the company's divisions have good operating momentum in 2006.

LGF's latest horror release, Hostel held up fairly well for a horror film, falling about 50% over the 3 day comparison and pulling in $11.7 million for the 4 day weekend. The film has now grossed $37 million and looks headed north of $50 million. The economics on Hostel are unclear but with a production cost of under $5 million, there is plenty of money to go around. The success of Hostel was just one of several news items for LGF over the weekend. On Friday, the Wall Street Journal reported that Starbucks (SBUX) has settled on LGF release Akeelah and the Bee as its first film in a push to replicate the coffee chains success in music distribution with DVDs. SBUX will add a big promotional effort to LGF's own work for the film. SBUX screened a dozen films before settling on Akeelah so hopefully that is a sign it is a good film. LGF was also in the news this weekend when the New York Post reported that the company may be close to settling a long-awaited deal to launch a horror channel in partnership with a leading cable or satellite company. LGF is likely to supply the content and management for the channel in return for distribution and a minority stake. I think this is one genre that has yet to be exploited on TV and a good deal could add lots of value for LGF over a multi-year time frame. I still own a small amount of LGF and plan to hold on as it appears after several disappointments the next couple of quarters are shaping up well. I think the stock has a shot at reaching the mid $10 range over the next six months, a gain of 20% against the latest quote.

Posted by Steve Birenberg at January 17, 2006 01:35 PM in DIS