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March 29, 2009

Monsters vs. Aliens Scores in 3-D Adding Bull Fuel to Movie Stocks

Monsters vs. Aliens met expectations with an opening weekend gross of $58.2 million. The box office also benefitted from a surprisingly strong opening for The Haunting in Connecticut. With these two films driving the weekend, the two week slump is over as the weekend was up 52.5% for the top 12 films according to BoxOfficeMojo.com. 2009 is off to a great start with a 10.2% gain and theater stocks have responded with the two largest chains, Regal Entertainment (RGC) and Cinemark Holdings (CNK), up 91% and 41%, respectively, from their 52 week lows. I think there is more room to run as comparisons remain easy and the release schedule remains favorable through April.

The big story for the weekend, however, will be the big opening for Monsters vs. Aliens which apparently got a nice assist from the 3-D showings. According to variety, 3-D ticket sales were 58% of the total despite representing just 28% of the screens.

Assuming that the average regular ticket price was $6 (lots of matinees and kids) and that 3-D tickets had a $3 premium, the average ticket price was $7.74, providing a 29% boost to the box office per ticket sold. Using this math (which is a guesstimate), total ticket sales would be about 7.52 million, providing a boost to the box office of about $13 million. Subtract $13 million from the opening weekend gross and Monsters vs. Aliens would have an opening weekend gross in line with the two other big opening, non-sequel, spring cartoons, Ice Age ($46.3 million) and Dr. Seuss' Horton Hears a Who! ($45 million).

In this sense, the opening of Monsters vs. Aliens is going to generate favorable headlines for 3-D films. Many more are in the pipeline so investors in theater stocks and producers of animated films (Dreamworks Animation and Disney) should get a boost.

Another way to look at it is that DWA's rumored production budget of $170 million had an extra $15 million in costs related to having a 3-D version of the film. Studios typically collect 70% or more of opening weekend ticket sales so Monsters vs. Aliens may recoup the additional investment for DWA is the first two to three weeks of North American distribution.

I still think it is too soon to call Monsters vs. Aliens as a clear hit, big money maker, and game changer for 3-D. We have to see how the legs are on the second weekend. We also have to see if the 3-D ticket price premium negatively impacts repeat viewing. Also, the film will have a phased opening abroad to coincide with spring school vacations in different countries. Animated filmed often produce 60% or more of their worldwide gross outside of North America. Finally, as every future animated film is released in 3-D and the number of 3-D theaters expands, the ability to hold a premium ticket price is an open question.

However, the early bottom line for the 3-D experiment is positive. This should cheer investors in movie related stocks who have had little to be excited about recently.

For more discussion of Hollywood and Wall Street, check out SNL Kagan's new blog, The Dow of Steve, set to make its debut this week.

Posted by Steve Birenberg at March 29, 2009 02:14 PM in Box Office