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July 24, 2006

Weekend Box Office Still Looks Good For Disney and Regal

After 17 days in theatres, Pirates of the Caribbean: Dead Man's Chest is the fastest grossing film in history. The movie remains comfortably on track to produce better than expected profits. In fact, benefits to Disney (DIS) relative to current expectations could begin as soon as the September quarter since the film seems likely to more than recoup its production and marketing costs during its global theatrical run.

Most analysts assume that a film will lose money in its theatrical window only to produce profits later in home video and television rights. DIS does face a potential timing issue in its June quarter when the bulk of marketing costs for Pirates and Cars are likely to be booked. Pirates wasn't released until July so this could create a timing mismatch.

Pirates is the fastest film to reach $300 million, in just 16 days. The film is running $21 million ahead of the prior champ in that category: Revenge of the Sith. Weekday and weekend grosses are now both running ahead of Sith, which went on to gross $380 million. The only real question now for Pirates is whether it can catch Shrek 2 and The Phantom Menace to become the #2 grossing movie moving of all-time....

DIS is already set to release the next film in the Pirates franchise next Memorial Day. Given the fact that both films are likely to produce profits in all windows and both DVDs seem likely to fall in DIS' fiscal year ending September 2007, next year is shaping up as an enormous for profits at the company's studio. This should serve to offset some concerns about slowing overall growth for DIS next year.

Looking more broadly at the weekend box office, despite weaker than expected openings for several new films, strength in Pirates and good depth allowed the overall result to return to positive comparisons. The weekend was up about 5%, leaving the year to date gain over 6% and the current quarter running ahead by 15%. These trends remain bullish for Regal Entertainment (RGC).

Posted by Steve Birenberg at July 24, 2006 08:45 AM in DIS