Pirates of the Caribbean: Dead Man’s Chest (POTC) blew away even the most optimistic estimates and broke all opening weekend records pulling in $132 million in just three days.
All by itself, POTC would have made for a successful weekend for the movie business, but not be overlooked is that the other films in the top ten also performed well. Second place Superman Returns fell 57% vs. its opening weekend but that is really not that bad considering the huge numbers for POTC. All the other films in the top ten fell between 40% and 50% except for Cars which fell just 30% and continues to show good legs. Overall, the weekend box office rose 42% according to estimates supplied by BoxOfficeMojo.com. The year-to-date box office is now up over 6%, which means that attendance has rebounded to positive growth despite all those home theatres, downloads, and alternative entertainment options.
I stand by my thesis that the death of theatrical movies is an invalid assumption. This creates investment opportunities for studios that are having successful years and movie exhibitors. Disney (DIS) is the best play among studios as the company looks like it will get the top two spots at the summer box office with POTC and Cars (yes- the “disappointing” Cars seems headed for over $235 million and second spot). POTC, also a DIS film, is sure to finish #1. And don’t forget last winter’s success for Chicken Little and The Chronicles of Narnia. Profits from these four films will flow to DIS over the next year.
Among exhibitors, I remain happily long Regal Entertainment (RGC), which should benefit from the recovering box office through good financial performance and expanding valuation. A 6% current yield and a history of special dividends is nice support while I wait for the shares to move up to my target of $23-24.
The coast is clear for DIS and RGC but comparisons do toughen this coming weekend when Charlie and the Chocolate Factory and Wedding Crashers opened very strongly a year ago. DIS reports August 8th and obviously is dependent on far more than the success of its movie studio.