« Apple Reports Tonight | Main | Apple Guidance Is The Problem »

July 21, 2008

Batman Saves Gotham and Hollywood

It's been kind of hard to miss the news on the record breaking opening of The Dark Knight but I'll try to put my usual Wall Street spin on the numbers.

The Dark Knight's $155.4 million is the best ever three day opening, beating Spiderman 3's $151.3. The Dark Knight also set a single day record on Friday and broke the midnight showings record. With Mamma Mia opening well at $27 million and several holdover films such as Hancock, Journey to the Center of the Earth, and Wall-E holding up very well in the face of the Batman onslaught, the weekend was also Hollywood's best ever non-holiday three day haul besting the opening weekend for Pirates of the Caribbean: Dead Man's Chest on July 7-9, 2006.

The weekend top 12 gross of $250 million was over $100 million of the same weekend a year ago. That is enough to bring the summer back from over a 3% deficit vs. year ago to just $16 million shy, or about one half of one percent. The quarter which was down 17% entering the weekend is no down around 5.4%.

I still expect a down summer and a down quarter but my prior prediction of a July/August dip of 10% looks steep with The Dark Knight likely to have good legs and maybe pull in $400 million....

Comparisons from here on out are real tough for the rest of the summer thanks The Bourne Ultimatum ($$227 million), The Simpson's Movie ($183 million), Rush Hour 3 ($140 million), and Superbad ($121 million). Besides the legs on The Dark Knight other films yet to open with a lot of box hype include The Mummy: Tomb of the Dragon Emperor, Pineapple Express, and Tropic Thunder.

In anticipation of the monster opening for The Dark Knight shares of Regal Entertainment rose over 2% on Friday and 9% for the week. Other theatre stocks also rallied hard with Cinemark Holdings up 11% and in theatre advertising giant National Cinemedia up 8% from its all-time closing low last Monday.

I'd expect some early strength off The Dark Knight opening for each of these stocks but I'd sell or short into upside in all three. I think one more dip in these shares is coming before a rally based on what a very promising winter holiday lineup against easy comparisons and a weak holiday a year ago.

The Dark Knight belongs to Time Warner which also has modest hits in Journey to the Center of the Earth and Get Smart. I'm not sure about the economics of The Dark Knight with DC Comics and Legendary Pictures likely participating at a high level. The film is rumored to have cost $180 million but there is some speculation that the marketing budget was held in check thanks to the incredible coverage the film was getting in the mainstream press due to the presence of the deceased Heath Ledger (FWIW, I saw the film on Saturday afternoon and would give it an 85 but when Ledger was on the screen in his talkative and contemplative moments I'd give him an A+). The bottom line for Time Warner is that The Dark Knight is putting a huge exclamation point on what is shaping to up be a very good year at the box office for the company's studios. With Time Warner Cable soon to be split off and rumors of a deal involving AOL getting much hotter Time Warner is becoming a content company again and it couldn't ask for a better start in its new strategic direction.

Nothing else critical at the studio level this weekend although News Corporation seems sure to face a modest write-off for Meet Dave which has not even grossed $10 million through two weekends. Fortunately, in the current quarter, News Corp has great strength in highly profitable DVD sales which will drive favorable comps in its studio segment.

I'd love to hear what other friends and clients of Northlake thought of The Dark Knight. Go ahead and post your opinions in the comments section or pop me an email. If I get enough responses, I'll post a follow-up comment later this week.

Posted by Steve Birenberg at July 21, 2008 11:56 AM in Box Office