Did This Hollywood Player Make a Huge Mistake?

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DC Entertainment makes official its bid to become more like Marvel, its longtime comic-book publishing rival, when Green Lantern hits theaters one week from today. Call it the Hollywood equivalent of an all-in bet -- one that investors aren't sure will pay off.

Shares of DC parent Time Warner (NYSE: TWX  ) are off more than 7% since early May, when the company beat earnings expectations but failed to lift its full-year earnings forecast. By contrast, earlier results from peers CBS (NYSE: CBS  ) and Viacom (NYSE: VIA  ) easily beat Wall Street's estimates, Reuters reports.

Recent history may also play a role in the selloff. While Marvel's Thor has been an unqualified success, bringing in $170 million at the U.S. box office and more than $420 million worldwide, X-Men: First Class netted just $55 million during its opening weekend -- the second-lowest debut gate in the history of the X-franchise, according to Box Office Mojo.

Mix in a busy summer film slate that includes Cars 2, The Smurfs, Captain America: The First Avenger, Super 8, and new installments in the Transformers and Harry Potter franchises, and you’ve got legitimate grounds for thinking there’s zero chance that Green Lantern can achieve what Iron Man did in 2008. Yet that's exactly what Time Warner wants and needs now that the Harry Potter series is ending.

It's a high hurdle. Iron Man took in more than $300 million at the U.S. box office and established Marvel as a Big Name in tentpole moviemaking. Fifteen months later, Walt Disney (NYSE: DIS  ) would spend $4 billion to acquire the company. Time Warner is betting that its table of DC superheroes can perform similarly, yet there's little evidence of success beyond hit-and-miss franchises built around Batman and Superman.

A successful debut for Green Lantern would give DC the credibility needed to build franchises around other Justice League names known mostly to comic-book geeks like me. Names like The Flash, Wonder Woman, Hawkman, Martian Manhunter, the Atom, and one of my all-time favorites, Green Arrow. What would a successful debut look like? Right now, $60 million seems like all that we investors can hope for.

Yet that may not be good enough. According to The New York Times, Warner has spent close to $300 million producing and marketing Green Lantern. DC and Warner Bros. wouldn't spend that much if they didn't believe Ryan Reynolds' Emerald Knight would prove to be as attractive to this summer's moviegoers as Robert Downey Jr.'s Golden Avenger was in 2008.

Will the ploy pay off? You tell us. Please vote in the poll below, and then leave a comment to tell us what you think of superhero summer. Will it prove profitable for entertainment investors?

Fool contributor Tim Beyers owns an untold number of comic books and still reads his favorites digitally. He's also a member of the Motley Fool Rule Breakers stock-picking team and owned shares of Time Warner and Walt Disney at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader.

Motley Fool newsletter services have recommended buying shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On June 13, 2011, at 1:50 PM, dnno1 wrote:

    I could understand why they spent so much to make Green Lantern work. Green Lantern probably has the largest mythology of any of the popular super heroes to date. In fact because his canvas is the universe that is divided into 3600 sectors (which are infinite in themselves), Green Lantern has an indefinite amount mythology that has yet to be written. Because the mythology is space based science fiction, action, adventure and fantasy, the franchise has the potential to appeal to demographics of those various genres. In particular, Star Wars and Star Trek fans. Now you might ask why these two markets? Well, it has been said that the spending power of just the Star Trek fans is equivalent to the GDP of a small country (keep in mind that Las Vegas went out of their way to create a themed casino based on that franchise). I don’t think it is necessary to talk about the spending power of Star Wars fans. If you could make a film (namely Green Lantern) that could appeal to those markets alone, you’ve got a major franchise on your hands (not only for the motion picture, but with toys, games, potential Television shows, et. al.). I have read articles out there where the producers of this film plan on making this the next Harry Potter as a cash cow franchise and in fact out performing it. Just in case you didn’t know, and for the folks who are reading this, Harry Potter is the highest grossing film franchise in the history of film (not corrected for inflation). Now about the return on investment (ROI) based on info from Filmforecasting.com, a film needs to make at the box office 183% of its production cost, before prints & advertising, distribution & fees, and points & residuals have been subtracted (this is just in the United States alone). If the make and market cost was $300 million, that would mean that this film would have to make $549 million in the U.S. to be box office profitable (filmforceasting.com predicts that "Green Lantern" will be box office profitable in North America). The thing that is quite vague to me is that Warner Brothers seems to be handling most of the overseas distributions, which would mean to me that any profits made from the overseas distributions (which are not taxable in the U.S.) would go to mostly to Warner Brothers, so it looks like you would have to consider the benefit of the overseas box office as well. Another unknown factor would be any revenue garnered from the new video on demand services they plan on using about two months after this film's release. There might be some revenue garnered from that that may not even be disclosed by the producers. Now your question was would the ploy pay off? Well now that we know a little more about the strategy and scope of this endeavor, we could certainly say that they have the deck stacked in their favor.

  • Report this Comment On June 17, 2011, at 4:12 PM, TMFMileHigh wrote:

    The reviews are in and they're ... ugly. I'm still hoping for the best:

    http://www.rottentomatoes.com/m/green_lantern/

    Any other thoughts on how Warner will do?

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On June 17, 2011, at 4:29 PM, GyroDynasty wrote:

    When Marvel was going through bankruptcy why didn't Time Warner just gobble it up? It seems that the intellectual property and near monopoly on comic books would be worth it.

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