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June 01, 2008

Box Office Has A Sexy Rebound

A better than expected opening for Sex and the City, a decent second weekend for Indiana Jones, and still great legs from Iron Man powered the weekend box office up 28% from the same weekend last year. A year ago there were no meaningful new openings and the top three films were the third versions of the Pirates, Shrek, and Spiderman franchises.

Despite the great weekend, the summer box office is down 6% versus a year ago. This is a pretty good performance given the very tough May comps and might improve significantly in June as a year ago June saw few major successes until the last weekend of the month. A strong slate of films currently in theatres will be joined next week by the anticipated blockbuster from Dreamworks Animation, Kung Fu Panda, and the next Adam Sandler film, You Don't Mess With The Zohan. Other June films to keep an eye include The Happening from M. Night Shyamalan and The Incredible Hulk (both debut June 13th) and Get Smart and The Love Guru (coming on June 20th). Should these films find an audience, 2Q08 will come in better than current estimates for theatre stocks imply. This would not provide a meaningful trading opportunity in the group, however, as comparisons vs. a year ago become brutal again form the last weekend in June through Labor Day.

From the studio's perspective....

....Viacom's Paramount has to be pleased so far as they are distributing both Iron Man and Indiana Jones. These films will not be hugely profitable for Viacom because Paramount does not own the original content but it is good news nonetheless, particularly given recent guidance reduction on the cable networks side of the company.

Time Warner got some relief form its Speed Racer bomb via Sex and the City. The films should be nicely profitable after such a strong start but the sharp fall-off from Friday to Saturday makes it hard to predict what kind of legs the film will have. The positive headlines off the better than expected opening will support the entire Sex and the City franchise including syndication of the TV series and merchandise tie-ins.

Disney investors are probably worried about lagging performance for Prince Caspian, especially in North America. Disney splits the economics with Walden Media which should provide some cushion. Ratings and advertising trends at ABC and ESPN should be a greater focus for Disney investors.

News Corp's Fox studio does not have a big summer planned but it has a modest hit in What Happens In Vegas. A series of nicely profitable films like this one is what NWS investors are hoping to see this summer. As with Disney, it is ad trends at the cable and broadcast TV networks that should be of concern to NWS investors.

Finally, DWA shares have everything riding on the opening weekend on Kung Fu Panda. I think it will take an opening comfortably north of $50 million and ultimate North American box office of $250 million to support and provide further fuel for DWA shares following the strong run off better than expected 1Q results. I'll post later this week when I have a better feel for opening weekend expectations for the film. DWA is the stock to trade this week if you are looking for action in the entertainment names.

Posted by Steve Birenberg at June 1, 2008 02:07 PM in Box Office

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